Jan 13 (Reuters) - BMO Capital Markets on Tuesday downgraded Alcoa Inc (AA.N) to “underperform” from “market perform,” a day after the largest U.S. aluminum producer posted a fourth-quarter loss, its first in six years, that was bigger than forecast.
The brokerage cited a weak price outlook for aluminum and growing inventory levels, and weak cash flows and higher indebtedness at the company for the downgrade.
“Investment risks with Alcoa are increasing. Barring a sizeable gain in the aluminum price, Alcoa is forecast to resort to increased borrowings over 2009 and potentially 2010,” analyst Tony Robson wrote in a note to clients.
Credit Suisse, UBS and S&P Equity Research also lowered their price targets on the stock, following the company’s weak quarterly results.
Shares of the company fell as much as 8 percent, but pared some losses to trade down 57 cents at $9.49 Tuesday morning on the New York Stock Exchange.
“We continue to caution that we believe the aluminum market is challenged,” analysts at UBS said.
The metal price has fallen some 50 percent since peaking at $3,380 per tonne last July and during the fourth quarter, aluminum MAL3 dropped from $2,415 on Oct. 1 and was around $1,502 on Tuesday.
Credit Suisse analysts said the company’s first quarter would be worse as declining raw material costs and restructuring will not be enough to offset the pricing weakness and the weak demand.
Following are the price target cuts made on the stock of Alcoa: Company Rating Price target
Current Prior UBS Neutral $10.50 $11.50 Credit Suisse Outperform $15 $20 S&P Equity Sell $9 $10 (Reporting by Antonita Madonna Devotta in Bangalore; Editing by Deepak Kannan)