Investing.com -- Wolfe Research adjusted its price targets and earnings forecasts for Alcoa (NYSE:AA) Corp and Century Aluminum (NASDAQ:CENX) Company, reflecting changes in the alumina market and the impact of tariffs.
The investment bank lowered its 2025 price target for Alcoa to $49 from $54, while raising Century Aluminum's target to $28 from $27.
The revisions come as Wolfe trims its 2025 alumina price forecast by 26% and increases its Midwest premium (MWP) and aluminum forecasts by 56% and 2%, respectively.
“Alumina supply was quicker to respond to higher prices than we expected, and we reflect a higher MWP on Trump's March 12 effective 25% aluminum tariffs vs a prior 10%, and removal of exceptions,” Wolfe analysts led by Timna Tanners said in a note.
“Uncertainty remained around a possible stacked 35% on Canada, adding an extra 10% tariff, which had fueled an even higher MWP premium before a recent retreat,” they added.
These tariffs are expected to keep the MWP elevated to attract the necessary imports to meet U.S. demand, which is net short by approximately 47%.
Meanwhile, Wolfe analysts expect domestic aluminum capacity to remain limited in the near term, with potential new supply not likely until late in the decade.
They believe global aluminum prices should stay supported by high energy costs and China’s continued adherence to its 45 million tonne annual production cap.
For Alcoa, Wolfe forecasts that the first-quarter earnings before interest, taxes, depreciation, and amortization (EBITDA) at $841 million, above the consensus of $756 million.
They expect first-quarter estimates (Q1E) to represent “a peak for the year, as fading alumina and less competitive Canadian tons after the new 25% tariffs hurt Q2E-Q4E.”
As a result, the firm trims its EBITDA projection to $2.15 billion from $2.38 billion for 2025. It foresees potential buybacks fueled by free cash flow in the second half of the year, supported by various strategic initiatives.
Century Aluminum, on the other hand, is seen as a clear beneficiary of the tariffs, with its first quarter EBITDA forecast raised to $86 million from $83 million, surpassing the consensus of $81 million.
The company is expected to benefit from the higher MWP due to a significant portion of its sales being in the U.S. Wolfe also notes the potential sale of Century's Hawesville power connection, which could yield the low end of an estimated $500 million - $5 billion of proceeds, or $4-49 per share.
Wolfe’s 2025E EBITDA was raised to $456 million, above the consensus estimate of $402 million.
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