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I am initiating coverage of Alcoa Corporation (AA) with a HOLDrating due to the following considerations; Key Positives: Recent acquisitions are reshaping AA into less of a commodity aluminum play and more of a company tethered to the secular growth in the aerospace industry, which has strong demand fundamentals, with multiple years of backlog. AA has decided to split it's businesses. I believe the announced split of AA's upstream and downstream businesses, expected to close during the second half of 2016, may unlock value, given the value-added downstream business deserves to trade at a premium to the mining business, which currently faces commodity headwinds. Key Concerns:Deteriorating credit metrics. Worsening margins due to consistent one-off charges (e.g. litigation). Heavy Capex, Consistent Restructuring Charges, and Increasing Leverage. Economic headwinds such as lower aluminum pricing, reduced market share for its engineered products and upstream. China's surging aluminum smelting capacity potentially weighing in on prices. Lack of spin-off information. Material hedge fund interest. Analyst: Opinion: Industry: Price Target Date: James Malke Sector Underperform Metals and Products $7.05 (DCF) 4/23/16 NYSE: AA Recommendation:HOLD Student Research University of Missouri Historical Price Chart Current Price10.4052Wk High14.2952Wk Low6.14Avg Vol (3m):30,042,296Market Cap (B):13.67P/E (ttm):28.43Basic EPS:(0.31)Div Yield:1.15Beta:1.37Stock Data (4/23/16)
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