Alcoa will kick off Earnings Season
Aloca Inc (AA) has disappointed the Street many times. More often than not the company balks its earnings call and down goes the stock. The only hope going for them is if they surprise everyone the stock could rip to the upside.
Despite it's nearly 20% run in the last 5 trading sessions Alcoa is down 31% year-to-date. Alcoa is trading today at $10.88, near the low end of it's 52-week range of $7.97 to $17.75. The stock has managed to bounce back in the last week thanks to the news the company is going to split in two. The company will separate its aluminum and primary metals operations ("Upstream Co.") from its fast-growing aerospace/automobile parts division ("Value-Add Co.")
Alcoa reports earnings tonight and revenue is expcted to be $5.68 billion and EPS of $0.14. The revenue estimate equates to a 4% decline sequentially.
Its a roll of the dice for AA tonight.
What the longs need to hear is more details on the split and how that is going to benefit shareholders. Alcoa needs a few good quarters before investors can make any sizable positions.
If you are long and WANT TO BELIEVE, chew on this "Buy" recommendation on Monday from Gabelli who set a $14.50 price target.
Gabelli says assets of the "Value Add" entity are worth $9.50/share in 2015 increasing to $11/share in 2016, net of estimated debt and pension, with assets of the "Upstream" entity worth upwards of $4/share essentially free to a buyer based on the current price.
The firm also sees growth opportunities in Alcoa's auto sheet segment from body-in-white patents and Micromill technology, and says Upstream assets are sufficiently low cost to survive extremely weak pricing driven by oversupply.
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