Even though aluminum prices have struggled over the past few years, good news is on the horizon for Alcoa (AA). The newest designs from both Airbus and Boeing (BA) will positively contribute to the growth of Alcoa over the next few years, as they are calling for the use aluminum and aluminum products rather than the composite that's been used for previous aircraft design. Alcoa's CEO, Klaus Kleinfeld, noted during the company's annual meeting on May 11th in Pittsburgh, the energy Alcoa is putting forward especially in the aerospace and automobile markets will help improve the company's bottom line in the coming quarters.
Last Year, AA reported a profit of just $611 million dollars or $0.55/share on sales of just under $25 billion. That being said, the past years have seen AA fall from $40/share in 2007 to about $9/share today. That's nearly a 75% decrease in share price and market cap. One of the biggest factors up until now was the price of aluminum, which is off nearly 32% since January 2011, which forcing the company to reduce such operations as smelting by almost 13%. The first quarter of 2012 was a bright one for AA as they reported earnings $0.14/share when the street was expecting a loss of $0.04/share.
On another note, Klaus Kleinfeld also discussed the company's joint venture with Saudi Arabian mining company Ma'aden. The joint venture was established in an effort to build the largest integrated aluminum facility located in the Middle East. The four part project is on pace to be completed in 2014, and the project's smelter and rolling mill could be operational as early as late 2013.
This could very well be the news that shareholders and potential investors have been waiting for. It's been five long years of declining profits and decreasing share price, and these contracts will enhance the revenues generated by Alcoa. That being said, this is a great buying opportunity for investors. The stock is trading at just under $9/share and I'd consider it a buy in the $8.25 - $11/share range. Analysts are looking for AA to earn $0.11/share on revenue of $6.04 billion dollars during the second quarter, and if AA can beat by $0.03-$0.05/share on revenues of $6.15 billion or higher, the stock will certainly see some upside.