Alcoa Delivers Record 1Q Results As Higher Aluminum Prices Fuel Sales

Alcoa delivered its highest quarterly results since 2018 as higher prices of alumina and aluminum resulted in record revenues and income in 1Q. The alumina, bauxite, and aluminum products company reported revenues of $2.8 billion, up 20.5% year-on-year, beating consensus estimates of $2.63 billion. The company reported adjusted EPS of $0.79 that came in ahead of analysts’ estimates of $0.45 per share.

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Alcoa (AA) President and CEO, Roy Harvey said, “We had an excellent first quarter with our best quarterly result since a record-setting year in 2018. We excelled from the top line to the bottom line, controlling production costs and capturing the benefits of improved demand and stronger prices for alumina and aluminum.”

“In addition to exceptional operating performance, we made the Company even stronger this quarter by improving the balance sheet. Using cash on hand and the proceeds from our debt issuance with our lowest-ever coupon rate, we paid off higher-interest rate notes in April and funded more of our pension obligations. This provides even greater flexibility to execute on our long-term strategy in the years ahead,” Harvey added.

The company’s record revenues were driven by increased shipments with third-party alumina shipments up 7% quarter-on-quarter due to higher production. Third-party shipments for aluminium rose 13% quarter-on-quarter as aluminium shipments resumed at San Ciprián in Spain.

Alcoa continues to expect rising demand for aluminum and continued economic recovery to fuel its growth for the rest of FY21. The company expects its Aluminium business to register double-digit growth year-on-year when it comes to sales of value-added products. AA’s shipments outlook for bauxite and aluminum remains unchanged from prior estimates.

For FY21, the company expects alumina shipments to range between 14 million metric tons and 14.1 million metric tons while total annual bauxite shipments are forecasted to be between 49 and 50 million dry metric tons. Alcoa sees the Aluminium segment shipping between 2.7 and 2.8 million metric tons. (See Alcoa stock analysis on TipRanks)

Following the first quarter results, B. Riley analyst Lucas Pipes raised the price target from $20 to $36 and reiterated a Hold rating on the stock. Pipes termed the results as “solid” as the company continued to implement initiatives including its strategic portfolio review and sale of non-core assets. The analyst cited the rise in prices of aluminium as a reason for raising the price target.

Shares of Alcoa have rallied 12.2% in the past five days.

Consensus among analysts is a Moderate Buy based on 3 Buys and 4 Holds. The average analyst price target stands at $36.14 and implies upside potential of 1.4% to current levels.