Why Alcoa Can't Get Its Shine Back

The year is nearing its end, and now is a good opportunity to look at what happened throughout 2012 to the stocks you follow. If you know the important things a company achieved, as well as any challenges it failed to overcome, then you can make a better decision about whether it deserves a spot in your portfolio.

Today, I'll look at Alcoa (NYSE: AA  ) . As a member of the Dow Jones Industrials (DJINDICES: ^DJI  ) , the aluminum maker has the smallest market cap of any Dow stock. Despite being a leader in its industry, Alcoa has struggled due to adverse macroeconomic conditions. Below, you'll find more on what moved shares of Alcoa in 2012.

Stats on Alcoa

Year-to-Date Stock Return

0.9%

Market Cap

$9.22 billion

Total Revenue, Trailing 12 Months

$23.8 billion

Net Income, Trailing 12 Months

($242 million)

1-Year Revenue Growth

(3.3%)

Dividend Yield

1.4%

CAPS Rating

****

Source: S&P Capital IQ.

Why hasn't Alcoa really recovered this year?
Alcoa is a big player in the aluminum market, but by itself, it isn't big enough to have complete control of the market. With the global slowdown in economic growth, Alcoa has faced difficulties from a lack of demand weighing heavily on prevailing aluminum prices.

Yet plenty of current and potential customers foresee greater needs for aluminum for the foreseeable future. Boeing (NYSE: BA  ) counts on Alcoa for the innovative aluminum-lithium plate for its Dreamliner aircraft, while aluminum plays a key role in production for automakers Ford (NYSE: F  ) and Tesla (NASDAQ: TSLA  ) , and it will continue to do so as they strive to achieve better fuel-efficiency by reducing weight. Alternatives like carbon fiber do present a long-term threat, but they haven't yet eliminated aluminum's usefulness.

Therefore, Alcoa is ramping up its bet on its future by buying out competitors' aluminum operations, figuring it can outlast the down market. With BHP Billiton and Rio Tinto having closed or sold off aluminum projects, Alcoa hopes to buy up some of those projects to add to its portfolio. At the same time, Alcoa has been willing to shut down smelters in order to produce cost savings while it waits out the storm.

Alcoa's most recent quarterly report set the tone for the immediate future as it reduced its forecast for Chinese aluminum growth from 20% to 8%. Looking forward, Alcoa needs China and other high-growth areas of the world to start pulling their weight again if it wants to make a full share-price recovery.

Learn more
Alcoa struggled to stay even in 2012, but will 2013 finally be a breakout year for the aluminum giant? Find out whether Alcoa is worth a closer look in the Fool's new research report on the stock. It's easy to get started; simply click here.

Click here to add Alcoa to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


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