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J.P. Morgan upgraded Alcoa (AA
) to overweight from neutral, and added the stock to its U.S. Focus List.
Analyst Michael Gambardella thinks the potential positive catalysts (improving aluminum fundamentals, the weaker U.S. dollar, downstream restructuring, and an asset divestiture program) for future earnings and stock price performance clearly outweigh the incremental negative news flow. He thinks aluminum market fundamentals are improving; while inventories are still high, they have been declining, with London Metals Exchange reaching 12-month lows on Tuesday.
Recent restructure and cost cutting actions should gain momentum. Gambardella raised the $1.65 2004 earnings per share estimate to $1.80.