Dallas, Texas 10/22/2013 (Financialstrend) – Alcoa Inc (NYSE:AA) is involved in the production and management of operations dealing in “aluminium, aluminium fabrication and alumina”. These four products are pushed into the market under four segments, “Alumina, Primary Metals, Global Rolled Products, and Engineered Products and Solutions.”
The world’s third largest producer of aluminium had a good Q3. It managed to beat market expectations and met the forecast its management had provided on their 2Q earnings call. A large part of the quick turnaround in the company’s fortunes can be ascribed to its Chief Executive Officer Klaus Kleinfeld. He brought in a host of changes in process and operations which were geared towards bringing down cost and increasing operational efficiency.
Like all other metal markets including precious metals, the aluminium industry too is faced with unfavourable head winds. The slowdown in demand and the oversupply of the metal in the product due to large scale production over the past 12 quarters has led to a severe downward pressure on the prices of aluminium.
Most of the analysts are betting on the next few months turning out to be a make or break scenario for the $9.2 billion market capped aluminium major. Issues plaguing the S&P 500 index tracked metals manufacturer centre on low aluminium price in the international market, a flat demand for the metal in China and disruption in services at its Saudi smelting plant. Many trade gurus believe the stock might soon lose its place on the S&P 500 index if it does not script a turnaround in quick time.
Alcoa had managed to post earnings per share of $0.44 and revenue of $297 million over the past 12 months. This translates to a stock trading at 18x EPS and 7x EBITDA, with more downside potential than upside. Alcoa stock ended October 21 at $8.60 per share, down by a marginal .03% over previous day close.