Spinoff sets the stage for gains

Article Excerpt

ALCOA INC. $8.99 (New York symbol AA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.3 billion; Market cap: $11.7 billion; Price-to-sales ratio: 0.5; Dividend yield: 1.3%; TSINetwork Rating: Average; www.alcoa.com) plans to split itself into two separate firms. One will focus on Alcoa’s upstream operations, which include mining bauxite ore and refining it into bulk aluminum products. This business will be the world’s fourth-largest aluminum producer, with $13.2 billion of annual revenue and $2.8 billion of gross earnings. The other company will focus on engineered aluminum products, such as components for cars and jet engines. This firm has $14.5 billion of annual revenue and $2.2 billion of gross earnings. If shareholders approve, Alcoa will complete the split in the second half of 2016. It will hand out shares of both companies to its investors, who will not be liable for capital gains taxes until they sell them. The split will help unlock some of Alcoa’s value, particularly as demand for…