FTSE 100: Index falls as earnings results weigh; pound below $1.33, Bodycote soars
On Thursday, JPMorgan updated its stance on Alcoa stock (NYSE:AA), reducing the price target to $25.00 from the previous $28.00, while maintaining a Neutral rating. The stock, currently trading at $25.07, has experienced significant volatility, falling nearly 38% over the past six months. According to InvestingPro data, Alcoa’s market capitalization stands at $6.5 billion, with analysts’ price targets ranging from $25 to $52. The adjustment follows Alcoa’s first-quarter earnings report, which revealed an adjusted EBITDA of $855 million, a 26% increase from the previous quarter and surpassing the consensus estimates of $787 million. The company’s latest twelve-month EBITDA stands at $1.57 billion, while revenue reached $11.9 billion with a healthy growth rate of 12.7%. InvestingPro analysis indicates the stock is currently undervalued, with 5 analysts recently revising their earnings expectations upward for the upcoming period.
Alcoa’s performance was bolstered by a 7% quarter-over-quarter rise in aluminum average selling price (ASP), contributing an additional $86 million. This was complemented by better-than-expected API costs, which saw a reduction of $76 million compared to the guided $90 million, and favorable price/mix effects adding $49 million. These gains were partially negated by a 10% decrease in alumina ASP, resulting in a $64 million impact.
The company also faced a $20 million headwind due to the effects of Section 232 tariffs on Canadian shipments, with a projected $90 million impact expected in the second quarter. This represents a substantial increase from previous forecasts, attributed to lower-than-anticipated Midwest Premium (MWP) amid current tariff conditions, market uncertainty, and pre-buying activities.
JPMorgan’s analysis anticipates a roughly $100 million net impact for the year based on an assumed aluminum price of $2,400 per ton and MWP of $0.39 per pound. The firm estimates that Section 232 could affect Alcoa’s earnings per share by $8 to $10, although it suggests that this may already be partially reflected in the stock price ahead of the earnings announcement.
In their commentary, JPMorgan analysts indicated that while they expect Alcoa’s stock to show weakness at the market opening, the potential for further declines might be limited unless a deep recession occurs. However, they advise investors to remain cautious, citing the ongoing uncertainty and the expectation that Section 232 tariffs will continue to be a factor in the foreseeable future. For deeper insights into Alcoa’s valuation and prospects, investors can access the comprehensive Pro Research Report available on InvestingPro, which includes detailed analysis of the company’s financial health, growth potential, and industry positioning among 1,400+ top US stocks.
In other recent news, Alcoa Corporation reported a strong first quarter in 2025, with earnings per share (EPS) of $2.15, significantly surpassing the forecasted $1.58 by 36%. Despite this earnings beat, the company’s revenue of $3.37 billion fell short of the expected $3.5 billion, reflecting some challenges in meeting market expectations. The company’s net income rose to $548 million, indicating a notable improvement from the previous quarter, and adjusted EBITDA increased by $178 million to $855 million. Alcoa also announced the restart of the San Ciprian smelter in Spain, aiming to enhance production capabilities. Concerns remain over U.S. tariffs on aluminum, which could impact future profitability, with potential costs estimated at approximately $100 million annually. Analysts have noted the company’s strategic initiatives and operational efficiencies as positive factors for its financial performance. Alcoa’s engagement with the U.S. and Canadian governments regarding tariffs was a focal point during the earnings call, highlighting ongoing market uncertainties.
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