Stifel Analysts Like Alcoa Inc (NYSE:AA)’s Strategy

Alcoa Inc (NYSE:AA)‘s endeavor to keep itself profitable amid the sluggish prices and abundant supply continues. The aluminum producer announced that it would sell its refining operations in Suriname, a government-run company. Also, the company is contemplating to cut down its refining capacity. The largest aluminum producer in terms of revenue across the globe informed that it might reach a sale agreement by July 1. The sale will be inclusive of refining, mining and Afobaka hydroelectric operations.

Does this analyst foresee a long-term upside in AA?

Curtailing refining capacity

At the same time, Alcoa Inc (NYSE:AA) stated that it will reduce its refining capacity at Suralco by 443,000 metric tons per year and aims to achieve the same by April 30. At present, Suralco’s refining capacity totals 2.2 million metric tons per year, while 876,000 are currently idle. The announcement comes on the heels of the company’s earlier statement, when it disclosed plans for curtailing 500,000 tons or 14% of smelting capacity alongside 2.8 million tons of refining capacity. It had said that the company wanted to shift its investments to more profitable businesses like auto and aerospace.

‘Liking’ strategy

Amidst the new developments taking place at Alcoa Inc (NYSE:AA), Stifel analysts Paul Massoud and Anthony Shen consider it to be a good buy. The analysts noted that the company’s fall in share prices is in line with the drop in aluminum prices that recorded 11% decline since February. However, Alcoa Inc (NYSE:AA)’s effort to transition from a commodity-oriented business to profitable segments are worthy.

Not only the company is looking at 14% reduction in its smelting capacity but is also announcing acquisitions to increase its exposure to high-margin businesses. Both Massoud and Shen liked this strategy and recommended investors to look at Alcoa Inc (NYSE:AA) from another angle. Meanwhile, the stock of the company fell by 1.73% to $13.06.

About the Author

Terrel is US Markets Daily's business news reporter. She joined US Markets Daily after five years as a print reporter.

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