# Alcoa (AA)

Sector: Aluminum & alumina

| Field | Value |
|---|---|
| Price | $41.46 |
| Fair value (Analysts) | $52.00 |
| Discount to fair value | 20.3% |
| Fair value uncertainty (Analysts) | High |
| Economic moat (Analysts) | None |
| LSEG analyst rating (1 strong buy to 5 strong sell) | 2.21 |
| Data as of | 2026-10-16 |
| Next earnings | 2027-01-15 (estimate) |

## In short

The market prices Alcoa for lower aluminum prices and the risk of the South32 asset purchase, and steady metal prices with a clean close in the first half of 2027 can close the gap.

## Themes and gap

- Themes: High debt (leverage), Regulation and courts (regulation-legal), Power and energy (power-energy)
- Gap type: Can close (closable)
- Why: The close of the AliGroup purchase in the first half of 2027 and the next quarterly reports show whether earnings hold at current metal prices.

## About

Alcoa mines bauxite, refines it into alumina and smelts alumina into aluminum. It has two segments, Alumina and Aluminum. Its largest bauxite mines and alumina refineries are in Western Australia. It also has operations in Brazil, Canada, Iceland, Norway, Spain and the United States. In 2025, Alcoa produced 9.6 million metric tons of alumina and 2.3 million metric tons of aluminum. It sells alumina to other smelters and sells aluminum as primary metal and value-added products. Its results move with the prices of alumina and aluminum and with its energy and raw material costs. Alcoa also holds shares of the Saudi Arabian Mining Company (Ma'aden), which were worth $1.36 billion at June 30, 2026.

## Thesis

The market prices Alcoa for lower aluminum prices and for the risk of its largest purchase in years. The average realized aluminum price fell to $4,527 per metric ton in Q3 2026 from $4,752 in Q2, and Q3 adjusted EBITDA fell to $789 million from $901 million. The alumina price is also much lower than in early 2025. On June 30, 2026, Alcoa agreed to buy South32's bauxite, alumina and aluminum assets in Australia, Brazil and South Africa (AliGroup) for about $3.1 billion in cash, about 17.0 million new shares and a contingent payment of up to $750 million. Alcoa issued $2.6 billion of new notes for the cash part. Mine approvals in Western Australia are slow, and the company expects mining in its next major mine regions to start no earlier than 2029. For the gap to close, three things must be true. Aluminum prices must stay near the levels of 2026, so that adjusted EBITDA stays near the $2.8 billion of the 12 months to September 30, 2026. The AliGroup purchase must close in the first half of 2027 and add to earnings per share and free cash flow, as management expects. The Western Australia government must put the 2025 to 2029 mine plan in place without new limits. The Q4 2026 report, estimated for about January 15, 2027, shows the production and cost trend. The deal close in the first half of 2027 is the main test. If these checks pass, the gap can close over the next four to six quarters. The main reason it may not close is a fall in aluminum prices, which Alcoa cannot control.

## Checkpoints

- Jan 15, 2027 (estimate): Q4 2026 earnings: production and costs. Status: Pending. Watch: Higher alumina and aluminum production in Q4 2026, as the company expects, and adjusted EBITDA near the $789 million of Q3 pass; a large fall in adjusted EBITDA or new refinery problems fail.
- Q2 2027 (estimate): AliGroup purchase closes. Status: Pending. Watch: The purchase closes in the first half of 2027 with the required approvals and no large change in terms passes; a delay past mid-2027 or new conditions that reduce its value fail.

## Balance sheet

- Cash: $4.4B
- Debt: $4.8B
- Net debt: $414M
- EBITDA, last 12 months: $2.8B
- Net debt / EBITDA: 0.1× (low)
- Interest cover: 15×
- Debt due within 12 months: $1.0M
- Last debt due: 2036

Alcoa funds its operations with senior notes and has a revolving credit facility. Total debt rose to $4.82 billion at September 30, 2026, from $2.45 billion at December 31, 2025, because Alcoa issued $2.6 billion of notes due 2034 and 2036 for the AliGroup purchase. Cash of $4.41 billion includes the money from these notes, which Alcoa holds for the cash part of the purchase of about $3.1 billion. After the purchase, net debt will be higher. Net debt was $414 million, and adjusted net debt, which adds the net pension and other postretirement liability of $555 million, was $969 million. EBITDA is adjusted EBITDA excluding special items for the 12 months to September 30, 2026. Interest cover is income before interest and taxes divided by interest expense for the first nine months of 2026. Alcoa expects interest expense of about $185 million for 2026. The Ma'aden shares, worth $1.36 billion at June 30, 2026, are a further source of cash.

As of 2026-09-30.

Sources:

- https://www.sec.gov/Archives/edgar/data/1675149/000119312526422891/aa-ex99_1.htm
- https://www.sec.gov/Archives/edgar/data/1675149/000119312526326265/aa-20260630.htm

## Recent events

- 2026-10-15: Alcoa reported Q3 2026 results. Revenue was $3.7 billion and net income was $483 million, or $1.81 per share. Adjusted EPS was $1.82 and adjusted EBITDA was $789 million, down from $901 million in Q2, because of lower aluminum prices and shipments. Free cash flow was $472 million. South32 shareholders approved the AliGroup sale on the same day, and Alcoa expects to close it in the first half of 2027.
- 2026-09-23: Alcoa completed the sale of $1.5 billion of 6.625% senior notes due 2034 and $1.1 billion of 6.875% senior notes due 2036. It intends to use the money with cash on hand to pay the cash part of the AliGroup purchase. Alcoa then ended the remaining bridge loan commitments.
- 2026-07-16: Alcoa reported Q2 2026 results. Revenue was a record $4.0 billion. Adjusted EPS was $2.12 and adjusted EBITDA was $901 million. Alumina production fell 6% from Q1 because of instability at the Pinjarra refinery and gas supply problems after Cyclone Narelle. Alcoa repaid the remaining $219 million of its 6.125% notes due 2028.
- 2026-06-30: Alcoa agreed to buy South32's interests in the Boddington bauxite mine and the Worsley alumina refinery in Australia, the Hillside smelter in South Africa, and the MRN bauxite mine and the Alumar refinery and smelter in Brazil. The price is about $3.1 billion in cash and about 17.0 million new Alcoa shares, plus a contingent payment of up to $750 million linked to future alumina and aluminum prices. Alcoa expects synergies with a net present value of about $900 million.

## Risks

- High: Results depend on aluminum and alumina prices, which Alcoa cannot control. The average realized aluminum price fell 5% from Q2 to Q3 2026, and Q3 adjusted EBITDA fell $112 million. A larger fall in prices reduces earnings and cash flow quickly.
- High: The AliGroup purchase needs regulatory approvals and is expected to close in the first half of 2027. Alcoa issued $2.6 billion of notes for it. If the deal is delayed, or the expected synergies of about $900 million in net present value do not come, Alcoa has more debt for less benefit.
- Medium: Alcoa needs state approvals in Western Australia for its next major mine regions and its rolling mine plans. The company expects mining in the new regions to start no earlier than 2029. Until then, it mines lower grade bauxite, which increases refinery costs.
- Medium: Smelters and refineries use large amounts of energy. Gas supply problems after Cyclone Narelle reduced alumina production in Q2 2026. Higher energy costs, supply cuts or carbon rules can lower margins.

## Links

- Page: https://picks.kamadorueda.com/company/AA/
- History of changes: https://picks.kamadorueda.com/company/AA/history/
- JSON with full history: https://picks.kamadorueda.com/data/company/AA.json

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