Alcoa drops on JPMorgan downgrade

Alcoa stock took a dive Wednesday after JPMorgan downgraded the barometer for market sentiment and made deep cuts to earnings estimates.

Shares of Alcoa, which kicks off the second-quarter earnings season on Monday, fell 1% to $7.72. JPMorgan lowered its rating to Neutral from Overweight and lowered its price target to $9, looking ahead to December 2014. Its previous target was $12 through the end of 2013.

“While global demand growth for aluminum continues to be solid, supply growth is outpacing it, which should continue to put pressures on prices. … outside of aluminum prices materially increasing or investor sentiment on the sector significantly improving, we see few catalysts for Alcoa’s stock in the near term.”

JPMorgan slashed its estimate for second-quarter earnings to 4 cents per share from 14 cents based on lower aluminum prices. It also lowered its estimate to 29 cents per share from 57 cents for 2013. For 2014, it cut estimates to 55 cents per share from $1.04.

JPMorgan metals strategists recently lowered their aluminum price forecasts to 89 cents per pound for 2013 from 94 cents per pound. They also forecast a drop in 2014, to 93 cents per pound from $1.06.

While Alcoa has lowered costs in its alumina and primary metals segments, and seeks to boost rolled and engineered products, these likely will be overshadowed, JPMorgan says, by “a persistently weak aluminum price environment.”