Image Source: Alcoa
Notes:
Aerospace: 7.5% end market CAGR (2013-2016); ~8 year production backlog for large commercial aircraft
Automotive: >50% CAGR for North American auto sheet (2013-2016); North American aluminum auto sheet demand by 2025 over 1 million metric tons
Commercial Transportation: 3-4% heavy duty truck market CAGR (2013-2016); 40% of wheels market expected to be aluminum by 2014
Packaging: 2-3% global beverage can market CAGR (2013-2016); aluminum penetration versus steel continues in China, Asia, Europe and Africa (currently 86% globally)
Continued Growth Across End Markets
Alcoa is increasing its 2014 global aerospace growth expectation by one percentage point (8 percent to 9 percent, previously 7 percent to 8 percent), on strong demand for both large commercial aircraft and regional jets and continued growth in the business jet market. The Company also continues to project 2014 growth in automotive (1 percent to 4 percent), packaging (2 percent to 3 percent), and building and construction (4 percent to 6 percent). Alcoa expects a steady commercial transportation market (-1 percent to 3 percent) and a decline in the industrial gas turbine market (-8 percent to -12 percent) on lower orders for new gas turbines and spare parts. Alcoa continues to project 7 percent global aluminum demand growth in 2014. Source: First Quarter 2014 Results Press Release.
Valuentum’s Take
Alcoa may not be as watched as it once was as a bellwether of the global economy, but we think the company is still very important in gauging the underlying strength of the end markets it serves. We were very encouraged to see the strong growth outlook for aerospace raised even further by the aluminum giant, and while this should not be new “news” to members given our bullish long-term thesis on aerospace, we believe it reinforces the position in Precision Castparts (PCP) in the portfolio of the Best Ideas Newsletter. We don’t expect to make any changes to our weighting in the firm in light of Alcoa’s performance, however. The best ideas are always included in the Best Ideas portfolio and Dividend Growth portfolio.
Aerospace Suppliers: AIR, ATRO, COL, EDAC, HEI, HXL, PCP, SPR, TDY, TXT