Shares of aluminum producers struggled for direction Tuesday as investors assessed whether industry leader Alcoa Inc.'s first-quarter profit miss reflects on the entire sector.
Profit at the top U.S. aluminum producer was less than half what it reported in the first quarter of 2007.
Some analysts responded Tuesday with a cautious view of the Pittsburgh-based company's prospects, citing conditions that apply to other aluminum producers.
Amir Arif of Friedman, Billings, Ramsey mentioned cost inflation, weak market conditions and a commodity correction as the major hurdles for any possible upside to the company's shares. He reiterated his "Hold" rating on the stock and his $43 price target.
But JPMorgan analyst Michael F. Gambardella, who kept his "Buy" rating on the stock, said that Alcoa's challenges do not reflect on all aluminum producers.
"We believe several other North American metal & mining stocks in our coverage universe have far greater upside earnings potential and more attractive valuation metrics than Alcoa," he wrote.
Meanwhile, Citi analyst John Hill said Alcoa's weak first-quarter results actually mask strong prospects for the world's third-largest aluminum maker. He kept a "Buy" rating on Alcoa Inc. stock, saying the company's performance is improving as it restructures.
Hill and several other analysts excluded currency charges when interpreting Alcoa's results. Hill said Alcoa's adjusted profit was larger than he expected, and he raised his price target on the stock to $50 from $48, implying he expects shares to rise 33.5 percent in the next year.
Alcoa slipped 11 cents to $37.33, Aluminum Corp. of China Ltd. fell $1.06, or 2.4 percent, to $43.84, Kaiser Aluminum Corp. rose $1.07 to $72.52, Century Aluminum Co. rose $2.17, or 3.1 percent, to $71.47 and Reliance Steel & Aluminum Co. rose 73 cents to $63.15.
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