Alcoa Rises 12.1% in a Month: Should You Buy the Stock Now or Wait?

Shares of Alcoa Corporation AA have been showing impressive gains of late, increasing 12.1% in the past month. The alumina, aluminum and bauxite products provider has outperformed the industry and S&P 500 composite’s growth of 11.3% and 4.3%, respectively. In contrast, the company’s peers, Constellium SE CSTM and Ryerson Holding Corporation RYI have gained 28.3% and lost 5.5%, respectively, over the same time frame.

AA Stock’s One-Month Price Performance

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Closing at $28.25 on Tuesday, the stock is trading below its 52-week high of $47.77 but higher than its 52-week low of $21.53. The stock is trading above its 50-day moving average (SMA) and below its 200-day SMA, indicating a mixed sentiment.

Factors Influencing Alcoa’s Performance

Demand for aluminum has grown significantly over the years, with growing popularity for lighter and energy-efficient electric vehicles, recycled aluminum and rechargeable batteries. The increase in global air travel has prompted aircraft manufacturers to ramp up production, spurring demand for aluminum alloys for fuselages and wings.

With the increase in aluminum demand, the tariffs on metals are gaining traction. The U.S. administration in March imposed 25% tariffs on all imported steel and aluminum as a measure to correct trade imbalances and boost the domestic industry. The move has increased steel and aluminum prices, thereby benefiting domestic producers like Alcoa. However, it has not induced a revival in U.S. smelting, the energy-consuming process of aluminum production.

A lack of access to competitively priced electricity in the US has led to several smelter closures in recent years, thereby affecting aluminum production. For instance, Alcoa permanently closed its 279,000 metric ton Intalco smelter in March 2023, which had remained idle since 2020. In the first quarter of 2025, AA’s third-party shipments of alumina declined 8%, while total shipments from the Aluminum segment decreased 5% on a sequential basis. 

Despite the challenges, the company’s Aluminum segment is benefiting from strong demand in the electrical and packaging end markets and continued progress on the Alumar, Brazil smelter restart. For 2025, AA expects the Aluminum segment to produce 2.3-2.5 million tonnes, while shipments are anticipated to be in the band of 2.6-2.8 million tonnes.

Alcoa’s Alumina segment is witnessing the growing popularity of its Sustana line of products. Last year, AA announced its first sales of EcoSource non-metallurgical alumina. Also, its low-carbon EcoLum primary aluminum currently comprises half of its metal sales in Europe. For 2025, alumina production is anticipated to be in the range of 9.5-9.7 million tonnes, while shipments are likely to be 13.1-13.3 million tonnes.

AA has announced several strategic actions over the past year to boost its organic growth and simplify its business portfolio. In August 2024, it acquired Alumina Limited, which enhanced its position as one of the world’s largest bauxite and alumina producers. The buyout is likely to provide Alcoa with long-term value creation due to greater financial and operational flexibility. Also, the company’s recent progress with stakeholders to improve the production capacity and long-term outlook of its San Ciprian site holds promise.

AA’s Better-Than-Industry Returns

Alcoa’s trailing 12-month return on equity (ROE) is indicative of its growth potential. ROE for the trailing 12 months (exiting first-quarter 2025) is 18.56%, higher than the industry’s 17.98%. This reflects the company’s efficient usage of shareholder funds. In terms of ROE, AA fares better than its peers, Constellium and Ryerson, which are pegged at 7.74% and (0.65%), respectively.

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Stock Valuation

With a forward 12-month price-to-earnings ratio of 8.78X, which is below the industry average of 9.08X, Alcoa stock presents an attractive valuation for investors. Also, the stock is cheaper than Constellium and Ryerson, which are trading at 9.24X and 11.59X, respectively.

Price-to-Earnings (Forward 12 Months)

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Alcoa’s Earnings Estimate Revision

The company’s earnings estimates for 2025 have decreased 13.1% to $3.57 per share over the past 60 days. Earnings estimates for 2026 have declined 19.2% to $2.69 per share. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

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Should You Invest in AA Stock Now?

Despite Alcoa’s several upsides and attractive valuation, the near-term challenges, such as rising electricity costs in the US affecting aluminum production and tepid earnings estimates, are limiting this Zacks Rank #3 (Hold) company’s near-term prospects. While current shareholders should hold their positions, new investors should wait for the stock to retract some of its recent gains and provide a better entry point.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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