NEW YORK — Analysts on Monday offered a rosier outlook for aluminum producer Alcoa Inc. _ and one upgraded the stock to a "Buy" _ roughly a week after the company posted third-quarter results that fell short of market expectations.
Prudential analyst John C. Tumazos raised his earnings expectations and stock price targets for both Alcoa and Canadian rival Alcan, based on an improved forecast for aluminum prices. He also lifted his rating on Alcoa to "Overweight," or "Buy," from "Neutral Weight."
Tumazos upped his aluminum ingot estimate for 2006 to $1.13 from $1.10 and to $1.05 from 92 cents in 2007.
He attributed the increase to better-than-expected demand growth this year, despite a weakening auto sector, lower inventories and lower-than-expected interest rates. Higher-than-expected copper prices have also served to boost aluminum, although indirectly, since aluminum can be used in some applications as a copper substitute.
"We are encouraged at the robust 5.5 percent demand growth performance of aluminum demand in 2006 despite several adverse developments," he wrote in a client note.
Both companies are also slated to benefit from the expiration of low-priced contracts and a decline in energy costs.
The analyst bumped his stock price target for Alcoa up $2 to $32 and also raised his forecast for earnings in 2007 through 2009. On Alcan, the analyst raised his price target $3 to $60 and pushed his earnings estimates higher for 2006 through 2009.
The upgrade follows Alcoa's third-quarter earnings report last week, which fell short of Wall Street expectations.
Elsewhere Monday, Morgan Stanley analyst Mark Liinamaa acknowledged the miss but said he sees "long-term value" in Alcoa. The third-quarter miss was led largely by one-time issues. He maintained an "Equal-Weight" rating on the stock and debuted a $30, 12-month price target on the stock.
Shares of Alcoa rose 39 cents to $27.06 on the New York Stock Exchange, while Alcan shares added 43 cents to $41.61.
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