Alcoa Inc's EPS forecast increased on back of improved Alumina profits: Rosenblatt

Analyst Chris Olin at Rosenblatt Securities Inc. increased its Earnings per Share (EPS) estimates for Alcoa Inc. The improved EPS estimates reflect an improved profitability outlook for the company’s Alumina segment.

The analyst stated that the company appears to be in a better position and could surpass its 2Q EPS forecasts. The better expectation is on the basis of relative strength in spot market pricing of alumina. Secondly, the better estimates are also on back of better expected contribution from its third-party bauxite revenues. Lastly, the incremental gains from Primary Segment productivity would also be a tailwind for the company.

As per revised earnings for Alcoa, the new EPS forecasted is of $0.10 per share, which is up by $0.02 per share. The analyst now projects full year earnings of around $0.40. The Sell-Side’s full year and quarterly estimates are ahead of Street’s expectations.

As per Sell-Side’s analyst, Alcoa’s shares appear to be undervalued in comparison with expected earnings potential capability through its combined portfolio, and also value creation from Arconic separation.

Rosenblatt has made no changes to its Buy rating for the stock, along with a Price Target of $15. The stock currently trades at $9.10 as of 12:18 PM EDT. The average Price Target for the stock by analysts at Street is of $10.82. The most bullish and bearish PT estimates are of $15 and $7 respectively.

Out of 18 analysts covering the stock at Street, nine have presented Hold rating for the stock, while six rate the stock as Buy. Two analyst rate the stock as Strong Buy, while one rate the stock as Sell.

Alcoa’s Year-to-Date (YTD) stock performance has been below par, as it has depreciated by 7.75 per cent. In past five days of trading only, stock has lost around 7.14 per cent of its value. We believe any positive upside in its performance via Alumina segment in upcoming results would push the stock upwards.