Alcoa Inc. (NYSE:AA) announced it has completed the acquisition of Germany-based Tital. Tital produces titanium and aluminum castings that are used in aircraft engines and airframes. The deal was originally announced in December of 2014. Alcoa is looking to expand on its aerospace franchise and transition its portfolio to be more geared to capitalize on the opportunities offered by the aerospace and automotive markets.
Titanium is the source for more than half of Tital’s revenue. Forecasts estimate its revenue to grow by 70% over the next five years due to recent demand for engine structural components made with the precious metal by jet engines makers. The company created over $100 million in revenue during 2014. Titanium is a very strong metal that can withstand the heat and pressure from jet engines and is a substitute for other metals because of its lightweight profile. This adds efficiency to the engines it is used to build.
Changing Their Image
Alcoa Inc. (NYSE:AA) was removed from the Dow Jones Industrial average in 2013 because the stock was performing poorly and the company is trying to revitalize that image. They have been searching for acquisitions that can boost revenues and make it more attractive as an industry leading entity. It’s also trying to shake its image as solely being invested in the aluminum industry by expanding to other metals such as nickel and titanium. Theyarealso lookingtoexpand their leverage in the commercial aerospace sector and capitalize on the growth it offers. The industry is expected to grow at a rate of 7% annually through 2019. The acquisition also expands the company’s exposure in the casting capacity sector along with the titanium markets.
The stock experienced a small selloff and is now pulling its short moving average below its long moving average. This is a bearish indicator and it needs to repair this damage before becoming attractive. Momentum I very weak and some positive volume are needed to change that indicator.