The record profit of aluminum produced Alcoa and the cautious position of investors
Strong report of the American metallurgical company Alcoa Corp. (AA) with a record profit from aluminum sales did not help the quotes. The dynamics of the company were so good that now many investors are taking profits, expecting new stable trends. In the first quarter of 2022, Alcoa’s revenue was $3.29 billion, compared to $2.87 billion a year earlier.
Net income rose to a record $469 million, or $2.49 per share. The company repurchased $75 million worth of shares and paid $18 million in dividends. Alcoa has started the year well, as the market remains favorable. The demand for aluminum is growing, prices are still high (and have even increased against the background of geopolitical uncertainty), and Alcoa improves margins. This was the driver of the AA stock rally in the first months of the year. However, there are also problems.
The increase in aluminum prices was approximately 14%, but Alcoa could not realize the full potential of this increase. She had to reduce aluminum production at a plant in Spain because of a workers’ strike, the root cause of which was high energy prices. As a result, Alcoa’s total aluminum output decreased by 10%. The closure of one of the largest markets means a new opportunity for aluminum prices to rise in the second quarter. Not all experts on Wall Street are sure of this – some believe that the aluminum price period has ended.
He lowered the recommendation from “buy” to neutral, maintaining the target price of $84. In addition, analysts at BMO Capital and B. Riley also lowered the recommendations and target prices of aluminum producers’ shares. Against this background, it is likely that many investors have fixed profits and took a cautious position, watching the further developments in the aluminum market. At the auction on April 21, the AA stock was worth $72.2.
