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Alcoa Forges $290M Supply Deal

Zacks Equity Research

Aluminum giant Alcoa (AA) has landed a deal with Spirit AeroSystems (SPR) to supply the latter with aluminum sheets for more than five years. Kansas-based Spirit is leading designer and maker of aerostructures for commercial, military, business and regional jets.

Under the multi-year contract worth roughly $290 million, Alcoa will supply Spirit with aluminum sheet products for the construction of fuselage skins (an aircraft’s outer skin) from its Davenport, IA plant. The facility houses the largest and most advanced aluminum rolling mill on the planet.

Alcoa, which derived $4 billion in sales from its aerospace business last year, makes lightweight metallic solutions for the aerospace industry. It holds leading market positions in aerospace forgings, extrusions, jet engine airfoils and fastening systems made by its downstream business, and aerospace sheet and plate made by its midstream business.

Alcoa’s Engineered Products and Solutions (downstream) and Global Rolled Products (midstream) divisions together represented 58% of its sales in first-quarter 2014.

Alcoa is witnessing healthy airline fundamentals. The company, on Apr 8, bumped up its global aerospace growth expectations for 2014 to 8%-9% from 7%-8% factoring in strong demand for both large commercial aircraft and regional jets and sustained growth in the business jet market.

Growth is expected to be backed by strength in the commercial segment on strong demand from Asia and the Gulf region, new aircraft orders and strong existing order backlog. The long-tem supply deal with Spirit reinforces Alcoa’s aerospace growth expectations and will help it to expand its foothold in this key market.

Alcoa is a Zacks Rank #2 (Buy) stock.

Other mining companies worth considering include General Moly, Inc. (GMO) and Golden Minerals Co. (AUMN). While General Moly retains a Zacks Rank #1 (Strong Buy), Golden Minerals sports a Zacks Rank #2 (Buy).

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Read the Full Research Report on SPR
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Read the Full Research Report on AUMN

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