Alcoa Delivers Exceptional Q4 Earnings, In-Line Revenue

Aluminum producer Alcoa Corp. (NYSE: AA) delivered exceptional fourth quarter and full-year fiscal 2021 results marking the highest annual net income and earnings, backed by favorable alumina and aluminum pricing, and operational efficiencies. During the quarter, Alcoa also awarded its shareholders with its first cash dividend of $19 million.

Following the news, shares rose during the extended trading session on January 19 after ending the day at $59.63. Alcoa produces bauxite, alumina, and aluminum products and is the world’s sixth-largest alumina producer.

Exceptional Q4 Results

Alcoa reported quarterly adjusted earnings of $2.50 per share, significantly higher than both analysts’ estimates of $1.77 per share and the prior-year quarter earnings of $0.26 per share.

The exceptional adjusted income was due to partially offset gains from non-core asset sales of $222 million and aided by special items including restructuring charges of $1.05 billion (primarily pension actions, curtailment of San Ciprián smelter, and permanent closure of Wenatchee smelter), and the discrete tax expense of $97 million.

Additionally, Alcoa’s Q4 revenue jumped 39.7% year-over-year to $3.34 billion and came in line with Street estimates. The revenue growth was mainly driven by higher alumina and aluminum prices.

For FY21, Alcoa reported revenue of $12.15 billion, growing 31% annually and also its highest figure since 2018. The growth was also driven by higher alumina and aluminum prices, and higher premiums for value-add products.

Moreover, FY21 adjusted earnings stood at $6.83 per share backed by the same reasons as the Q4 numbers. In FY20, AA reported an adjusted loss of $1.16 per share.

Comments

President and CEO of Alcoa, Roy Harvey, said, “Our performance demonstrates that our long-term strategies are delivering value and strengthening Alcoa, so we can be successful through all phases of the commodity cycle… We have a talented workforce, a portfolio of strategically located assets, a suite of low-carbon products, and innovative technologies with the potential to transform our industry.”

Analysts’ View

Responding to the results, Goldman Sachs analyst Emily Chieng reiterated a Buy rating and $68 price target on the stock, which implies 14% upside potential to current levels.

Chieng believes the solid beat results will be well received by the shareholders especially in times of the current inflationary environment.

Overall, the stock commands a Strong Buy consensus rating based on 7 Buys and 2 Holds. The average Alcoa price target of $66.33 implies 11.2% upside potential to current levels. Meanwhile, AA shares have gained a whopping 198.6% over the past year.

Hedge Fund Activity

According to TipRanks’ Hedge Fund Trading Activity tool, confidence in Alcoa is currently Positive, as 13 hedge funds increased their cumulative holdings of the AA stock by 128,500 shares in the last quarter.

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