FP Trading Desk submits: Alcan Inc. (NYSE: AL) shares traded up a couple of bucks on both the New York and Toronto exchanges on Wednesday, a day after it reported better-than-expected first quarter results on the strength of increased aluminium prices.
Most analysts would agree the stock's upward push isn't over yet, but just how high Alcan can go is still up for debate.
RBC Capital analyst H. Fraser Phillips reiterated his "outperform" rating on the stock and left his price target of US$63 unchanged.
"We believe that Alcan offers investors the potential for above average returns within the mining industry based on our positive outlook for the aluminium market and improving business results," Mr. Phillips said in a note to clients
He expects continued improvement as the year progresses, saying the newly expanded Gove alumina refinery in Australia will make its first major contribution by the third quarter and disruptions due to strikes in Guinea, which reduced EBITDA by US$21 million in the first quarter, will be eliminated by the end of the fiscal year.
Deutsche bank analyst Ted Tabasso also anticipates favorable benefits related to the Gove expansion, adding in his research note that he likes Alcan's simple and more leveraged business model, its low cost position and its European exposure.
He outdid Mr. Phillips and increased his price target from US$60 to US$65 while maintaining his "buy" rating.
John Redstone, however, appears to be the most bullish of all. The Desjardins analyst reiterated a target of US$75 and left his "top pick" rating unchanged.
Despite facing costs pressures, he believes Alcan has improved its control on costs and buoyed by a strong aluminium market, the company should earn US$6 per share in 2007 and $7.51 per share in 2008.
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