What’s Next for Alcoa After An Upbeat Q4?

January 31st, 2025 by Trefis Team
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AA: Alcoa logo
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Alcoa

Alcoa (NYSE:AA) latest earnings report for Q4 2024 showed strong financial improvements with the company reporting sales of $3.49 billion, a significant increase from $2.6 billion in Q4 2023. It also swung to profitability, reporting net income of $202 million, compared to a net loss of $150 million a year ago. Earnings per share came in at $0.77, a sharp turnaround from the loss per share of $0.84 in Q4 2023. In spite of the positive results, the stock declined by almost 6% in the last five days.

For 2025, Alcoa expects alumina production to decline slightly due to the curtailment of its Kwinana refinery, but aluminum production is expected to rise due to smelter restarts. The company also anticipates a $60 million sequential negative impact in Q1 2025 due to seasonal factors and other operational changes. Separately, if you want upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

What Does This Mean For Alcoa Stock?

The increase in AA stock over the last 4-year period has been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were 159% in 2021, -23% in 2022, -24% in 2023, and 12% in 2024. The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last 4-year period.

Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment around rate cuts and multiple wars, could AA face a similar situation as it did in 2022, 2023, and 2024 and underperform the S&P over the next 12 months – or will it see a strong jump?

Relevant Articles
  1. Why Alcoa Stock Fell 60%?
  2. Alcoa Stock Up 75% In One Year, What’s Next?
  3. Up 17% This Year, Will Alcoa Stock Gain Further Following Q2 Earnings?
  4. What To Expect From Alcoa’s Q3 Results?
  5. What To Expect From Alcoa’s Q2 Results?
  6. What To Anticipate From Alcoa’s Q1 Results?
We are positive on Alcoa stock, primarily due to higher aluminum demand, driven by the automotive, aerospace, and renewable energy sectors, which could boost the company’s revenue. Additionally, the company has successfully improved profitability through efficiency measures. In Q4 of 2024, Adjusted EBITDA surged 196% sequentially to $1.6 billion, driven by higher alumina and aluminum prices and lower raw material and energy costs, though these gains were partially offset by increased production costs. Alcoa ended the year with $1.1 billion in cash, and its profitability improvement program exceeded targets, achieving $675 million in improvements over the year. We value AA stock at around $48 per share, which is around 36% ahead of the current market price. See our analysis of Alcoa valuation for a closer look at what’s driving our price estimate for Alcoa and how Alcoa’s valuation compares with peers. Also, see our analysis of Alcoa Revenue for more details on how Alcoa’s revenues are expected to trend.
 Returns Jan 2025
MTD [1]		 Since start
of 2024 [1]		 2017-25
Total [2]
 AA Return -7% 3% 25%
 S&P 500 Return 3% 27% 171%
 Trefis Reinforced Value Portfolio 5% 21% 786%

[1] Returns as of 1/29/2025
[2] Cumulative total returns since the end of 2016

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