Alcoa Corporation’s AA investors have been witnessing some short-term gains from the stock of late. Shares of the alumina, aluminum and bauxite products provider have surged 35% in the past year, outperforming the industry and S&P 500 composite’s growth of 11.9% and 23.2%, respectively. The company has also outperformed its peers like Constellium SE CSTM and Olympic Steel, Inc. ZEUS, which have declined 51.7% and 48.6%, respectively, over the said time frame.

AA Stock 1-Year Price Performance

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Closing at $37.01 on Tuesday, the stock is trading below its 52-week high of $47.77 but higher than its 52-week low of $24.86. The stock is also trading close to its 50-day and 200-day moving averages, indicating stability in the price.

What’s Behind Alcoa Stock’s Momentum?

The strongest driver of Alcoa’s business at the moment is solid momentum in the Aluminum segment. An increase in demand for aluminum in both Europe and North America has been supporting the segment’s growth of late.

Solid momentum in the electrical and packaging markets and recovery in the building & construction sector have been supporting the segment’s growth. For 2025, the company 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 has been reaping the benefits from higher shipments of alumina and increased smelter production. As part of its Sustana line of products, AA recently 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.

The company has announced several strategic actions over the past year to boost its organic growth and simplify its business portfolio. This includes the acquisition of Alumina Limited in August 2024, which enhanced its position as one of the world’s largest bauxite and alumina producers. The buyout is expected to provide Alcoa with long-term value creation with greater financial and operational flexibility.

Alcoa initiated the sale of its investment in the Ma’aden joint ventures valued at about $1.3 billion. Also, in the fourth quarter of 2024, the company made progress with stakeholders to improve the production capacity and long-term outlook of its San Ciprian site.

AA’s commitment to rewarding its shareholders through dividends is also encouraging. For instance, in 2024, it paid out dividends of $89 million, representing an increase of 23.6% year over year.

Alcoa’s Earnings Estimate Revision

The company’s earnings estimates for 2025 have increased 9.1% to $4.43 per share over the past 30 days. Earnings estimates for 2026 have inched up 1.6% to $3.17 per share.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

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Stretched Stock Valuation Remains an Overhang

AA’s lofty valuation remains a concern. The stock is trading at a forward 12-month price-to-earnings (P/E) ratio of 8.69X, higher than the industry average of 8.14X. This elevated valuation could make the stock vulnerable to further pullbacks if market sentiment sours. However, the stock is undervalued compared with its market peer, Metallus Inc. MTUS, which is trading at 14.15X.

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Our Final Take

Robust momentum across Alcoa’s Aluminum and Alumina segments, along with its leading position in the alumina and bauxite markets, positions it favorably for impressive growth in the quarters ahead. The company’s strategic acquisitions and collaborations with stakeholders to expand its production capacities should also support its top-line performance.

Despite its expensive valuation, positive analyst sentiment and robust growth prospects indicate it is the right time for potential investors to bet on this Zacks Rank #2 (Buy) company. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Alcoa (AA) : Free Stock Analysis Report

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