JP Morgan Downgrades Alcoa Rating

Analyst Michael Gambardella suggests investors remain cautious on buying the stock until it trades closer to $30

Alcoa Inc. (AA ) shares were lower after the company said it sees fourth-quarter earnings per share from operations of about $0.10. JP Morgan downgraded its rating on the shares to market performer from buy. Analyst Michael Gambardella says Alcoa expects to incur fourth-quarter charges of about $40 million (after taxes) due to the deteriorating economic conditions in the U.S. He notes that 100,000 tonnes of alumina were lost due to a strike at the company's Jamalco refinery. Gambardella expects a $45 million loss attributable to a power failure at the company's Warrick, Ind., plant to evenly impact the fourth quarter and the first quarter of 2002. He thinks the current valuation of the stock is too rich, and suggests investors remain cautious on buying Alcoa stock until it trades closer to $30. The analyst cut his $1.65 2001 EPS estimate to $1.43 and his $2.00 2002 forecast to $1.35.