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Investing.com - Jefferies has reiterated its Buy rating on Alcoa (NYSE:AA) while maintaining its $35.00 price target, citing improved quarterly estimates and strengthening balance sheet metrics. According to InvestingPro analysis, Alcoa appears undervalued at its current market cap of $7.68 billion, trading at an attractive EV/EBITDA multiple of 3.45x.
The firm has increased its Q3 and Q4 EBITDA forecasts by 12% each, partly due to higher assumed Midwest premium calculations at 50% of the LME price. This premium level should fully offset negative impacts from tariffs on Alcoa’s Canadian operations, according to Jefferies. This aligns with InvestingPro data showing three analysts revising their earnings upward for the upcoming period.
Alcoa’s cash position improved significantly in Q2, with its cash balance rising from $1.2 billion to $1.5 billion while adjusted net debt decreased from approximately $2.1 billion to $1.7 billion. This brings the company closer to its stated adjusted net debt target range of $1.0-1.5 billion. The company maintains a healthy current ratio of 1.65 and a manageable debt-to-equity ratio of 0.43.
Jefferies projects Alcoa will reach its debt target range in 2026, potentially enabling share repurchases that could positively impact the stock price. The firm’s updated estimates place Alcoa at a 2026 estimated EV/EBITDA of 5.4x, P/E of 10.7x, and free cash flow yield of 6.5%.
The research note indicates 2025 full-year EBITDA is forecast at $1.86 billion, aligning with consensus estimates, while 2026 EBITDA is projected at $1.85 billion, reflecting increased cost assumptions in the model.
In other recent news, Alcoa Corporation reported second-quarter 2025 earnings and revenue that surpassed analysts’ expectations. The company posted an adjusted earnings per share (EPS) of $0.39, exceeding the forecasted $0.33, and reported revenue of $3.02 billion, which was above the anticipated $2.91 billion. Alcoa’s adjusted EBITDA for the quarter was $313 million, surpassing consensus estimates of $292 million. Despite the positive earnings, the company faced a $115 million impact from higher Section 232 tariffs, which is expected to rise to $215 million in the third quarter. Alcoa has been actively redirecting Canadian production to non-U.S. customers to mitigate tariff impacts. Analyst firms have adjusted their price targets for Alcoa, with JPMorgan lowering its target to $27 while maintaining a Neutral rating, and BofA Securities raising its target to $27 with an Underperform rating. Citi maintained a Buy rating with a $42 target, citing solid earnings but noting operational challenges. Additionally, Alcoa is addressing delays in accessing higher-grade bauxite in Western Australia and is working on contingency plans to manage these challenges.
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