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Bull of the Day: Alcoa (AA)

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Thanks to a recent uptick in the global economy, companies in the industrial space have been on fire. We have actually seen the sector surge up to #2 overall, and it has been in that position for the entire month of September too.

While many are responsible for this impressive staying power, one company that is definitely worth watching in this environment is Alcoa (AA - Free Report) . This aluminum giant has been on a great run in recent months, and the latest numbers suggest that it could retain its leadership role into the Fall as well.

AA in Focus

Alcoa has been seeing rising earnings estimates following its solid earnings report, and we haven’t seen any analysts slash estimates in the past month for any of the time periods we study. This includes the current quarter, current year, next quarter, and next year, so clearly the optimism regarding AA’s future is widespread.

Much of this is thanks to strength in aluminum prices, which is largely due to Chinese growth prospects picking up steam. It also doesn’t hurt that China is cracking down on aluminum production , shuttering plants that do not have the required permits, as well as those that do not pass environmental muster.

This kind of situation is obviously great news for Alcoa, as a reduced supply and possible increases in demand have led to the boost in prices. And with Alcoa as a major producer, it looks to scoop up some additional demand—or at least display pricing power—in the near future.

No wonder analysts have been raising estimates, and why we see the most accurate estimate for the current year higher than the consensus by nearly 11%, and the most accurate estimate for the next year higher by an impressive 25%.

With such strength in the industry, strong trends in the aluminum market, and remarkable earnings estimate revisions, it isn’t surprising at all that Alcoa has recently moved up into Zacks Rank #1 (Strong Buy) territory. That is why we are looking for continued strength out of this name, and particularly if industry trends remain in place.


Alcoa Corp. Price and EPS Surprise

Alcoa Corp. Price and EPS Surprise | Alcoa Corp. Quote


Bottom Line

There is a lot to like about the aluminum market these days, and that is especially true for Alcoa. The company has seen rising earnings estimates, and big growth levels are projected thanks to soaring aluminum prices and demand.

But if that wasn’t enough, it is also worth considering the company’s strong fundamental position too. AA has a VGM score of ‘A’, including grades of at least ‘B’ for Value, Growth, and Momentum. Cash flow growth projections are especially impressive for Alcoa, while the company is still sporting a modest forward PE too.

There is plenty to like for investors of all stripes in this name, and really the industry at large as well. So, if you are looking for a top choice in the industrial side of the market, definitely give Alcoa a closer look for your portfolio.


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