Here’s Why Alcoa’s Stock Keeps Soaring

Alcoa (NYSE: AA)

• Going into the report Alcoa was expected to report earnings of $0.12 per share, up from $0.07 per share in last year’s second quarter.

• Revenue, meanwhile was expected to drop 3.3% year-over-year to $5.66 billion.

Alcoa reported strong second quarter results after markets closed on July 8th.

Alcoa (NYSE: AA)

• Alcoa reported earnings per share, excluding special items, of $0.18. That’s $0.06 per share above or 50% higher than estimates.

• Stronger than expected revenue of $5.8 billion was a contributor to the earnings beat as revenue stayed flat over last year as opposed to slumping 3.3% as analysts were expecting.

Alcoa easily beat both numbers as the company delivered strong second quarter results.

Alcoa (NYSE: AA)

• Engineered Products and Solutions delivered its highest after-tax-operating income in history thanks to record adjusted EBITDA margin of 23.1%

• Meanwhile, Global Rolled Products after-tax-operating income was up 34% over just last quarter.

• Finally, Alcoa’s upstream revenue improved for the 11th straight quarter.

All three of Alcoa’s business segments delivered strong results.

Alcoa (NYSE: AA)

• Positive free cash flow of $260 million.• Net debt is down to $6.9 billion, which is the lowest

since September of 2007.• Debt-to-Capital ratio of 35.4% is closing in on its target

range of 30%-35%. • This has the company on target to meets its 2014 goals.

This produced positive free cash flow, which improved Alcoa’s balance sheet.

Alcoa (NYSE: AA)

• Positive free cash flow of $260 million.• Net debt is down to $6.9 billion, which is the lowest

since September of 2007.• Debt-to-Capital ratio of 35.4% is closing in on its target

range of 30%-35%.

This produced positive free cash flow, which improved Alcoa’s balance sheet.

Source: Alcoa Investor Presentation

Alcoa (NYSE: AA)

• Company announced the $2.85 billion acquisition of Firth Rixon, which will strengthen its aerospace offerings.

• Alcoa is also investing $125 million to expand its advance jet engine component offerings.

• Company now has curtailed 147,000 metric tons of smelting capacity in Brazil.

Looking ahead Alcoa continues to accelerate the transformation of its portfolio.

Alcoa (NYSE: AA)

• Positive free cash flow of $260 million.• Net debt is down to $6.9 billion, which is the lowest

since September of 2007.• Debt-to-Capital ratio of 35.4% is closing in on its target

range of 30%-35%.

This produced positive free cash flow, which improved Alcoa’s balance sheet.

Source: Alcoa Investor Presentation

Alcoa (NYSE: AA)

• Company on pace for $1.8 billion in organic value-add revenue in 2016.

• Firth Rixson to add $1.6 billion in revenue and $350 million in EBITDA in 2016.

• Investments in advanced jet engine components to grow that segment’s revenue to $2.2 billion by 2016.

This has the company set up for continued growth.

Investor takeawayAlcoa’s transformation continues to pick up steam. The company is growing its

higher margin value-add segments while also creating a more competitive commodity business. It’s a move that should fuel Alcoa’s stock to continue soaring

higher.

Source: Alcoa Investor Presentation

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