Prudential lowered its investment ratings on both aluminum company Alcan's (CD) and steel producer Nucor Corp. to sell from hold.
Analyst John Tumazos says Alcan's pretax earnings per share is likely to be insignificant if recent $0.586 per pound LME ingot prices continue, estimates co. breakeven point is near $0.55/lb., suggesting losses possible.
He noted major $10 billion capital initiatives of past several years are value-destructive, and worsen returns at low prices. He says new CEO, CFO have not introduced new or revised existing action plans. He also said 2002 EBITDA target of $3 billion could be missed by 50% at current prices. He also cuts $30 target to $24.
He downgraded Nucor because its shares are up about 30% from September lows while near-term earnings per share outlook halved with its Sept. 20 EPS warning.