Cost cutting helps insulate Alcoa

Article Excerpt

ALCOA CORP. $40 (New York symbol AA; Conservative Growth Portfolio, Resources sector; Shares o/s: 185.0 million; Market cap: $7.4 billion; Price-to-sales ratio: 0.6; No dividends paid; TSINetwork Rating: Average; www.alcoa.com) has benefitted from higher prices in the past few months for alumina (used to make aluminum metal). The gains are mostly due to the shutdown of a large Brazilian refinery dut to environmental violations, and sanctions on Russian producer Rusal. However, alumina prices could decline once the Brazilian refinery resumes operations later this year. As well, sanctions on Rusal are set to expire in October. Even so, Alcoa should continue to benefit from its restructuring plan, which involves closing older, less-efficient smelters. As a result, it will probably earn $4.07 a share in 2018. That’s up 35.2% from $3.01 in 2017. The stock trades at just 9.8 times that estimate. Alcoa is still a buy. buy…

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