aa_sp15

Krause Fund Research
Spring 2015
Hawkeye Pride Alcoa Inc. (NYSE: AA)
Recommendation: STRONG BUY April 17, 2015
Analysts
Greg Kordesh
Gregory-kordesh@uiowa.edu
Steven Hensley
Steven-hensley@uiowa.edu
Mitch Ross
Mitch-ross@uiowa.edu
Michael Lewiston
Michael-lewiston@uiowa.edu
Current Price $13.43
1 Year Target Price $18-20
Alcoa Poised to Outperform
Specialty Metals
Company Overview
Alcoa, Inc. is an aluminum and specialty metals company
headquartered in New York City. Alcoa is a vertically integrated
company, with upstream operations in Alumina and Primary
Metals. Their downstream production includes Rolled Products
and Engineered Solutions. Their primary end markets are
aerospace and defense, automotive, and construction. Alcoa
operates globally, with most operations in North America and
Western Europe. They have sites in China, the Middle East,
South America, and Australia as well. Alcoa has recently
undergone significant restructuring, shifting away from upstream
operations to downstream production.
Stock Performance Highlights
52 week High $17.75
52 week Low $12.34
Beta Value 1.61
Average Daily Volume 24.3 m
Share Highlights
Market Capitalization $16.41 b
Shares Outstanding 1,216 m
Book Value per share $0.08
EPS (FY’14) $0.90
P/E Ratio 16.58
Dividend Yield .76%
Dividend Payout Ratio 13.3%
Company Performance Highlights
ROA 0.72%
ROE 1.81%
Sales $23.91 b
• Initiating coverage with a BUY rating and $18-20 price
target
• Increasing margins from shift to downstream, value-added
products as well as cutting high-cost smelting
• High potential for market share gains due to strategic
contract bids in automotive OEM and aerospace industries,
and a reduction in steel’s market share in these markets
• Recent acquisitions of Firth Rixson and RTI Metals increase
aerospace production and diversifies metals in to titanium
• Current share price reflects uncertainty regarding ability to
execute on restructuring efforts, and net losses and earnings
volatilitypost-recession
• First-quarter earnings beat suggests management is on track
to continue meeting restructuring goals which will lead to
long term share gain
One Year Stock Performance
Yahoo! Finance
1 | P a g e
Financial Ratios
Current Ratio 1.48
Debt to Equity 1.38

Producer Price Index
The Producer Price Index (PPI), a measure of the price change
from the perspective of the seller, directly affects Alcoa by
changing their potential for volume and profit margins. If the
PPI surges, companies face either decreases in volume as they
are forced to increase prices, or reduced margins as they
maintain price levels. The most recent PPI report showed only a
0.2% increase in prices, which was in line with consensus.
Continued low oil prices have significantly contributed to
low inflation, as the year-on-year change still remains a 4.3%
decrease, while PPI excluding food and energy shows a 0.9%
gain12
.
In the short-term, we believe the PPI change will remain low due
to relatively low oil, continued consumer uncertainty, and a
propensity to save. We forecast a 0.5% increase in PPI in six
months due to these factors. However, in 2-3 years, the PPI will
increase more significantly at a 2% clip as oil prices and the
economy recover.
Alcoa will receive tailwinds in the short-term as a result of low
producer prices, particularly in regard to oil. Low oil prices
contribute to lower aluminum prices, boosting Alcoa’s margins.
In addition, Alcoa’s transportation costs will fall. However,
rising oil prices in the future will increase aluminum prices,
which could hurt Alcoa’s bottom line. We believe Alcoa’s
restructuring, which will decrease their exposure to changes in
aluminum prices, will help offset this upward movement in
price.
Unemployment
The U.S. unemployment rate is a concern for all sectors of the
economy for many reasons that have significant impact on
performance.
A high unemployment rate suggests that many citizens won’t
have the sufficient funds to purchase products made by firms.
This affect trickles down through all sectors of the economy.
Retailer’s sales will decline, and will lack the capital to purchase
more inventories along with the lack of demand from
consumers. This effect transfers to producers of these goods and
then through to the industrial firms that help support the upkeep
and development of the producers of consumer goods. In regards
to Alcoa, a high unemployment rate will result in a lower
demand for the goods that they provide and decrease firm value.
As of March 2015, the unemployment rate came in at 5.5%,
meeting consensus estimates. Overall for 2015, this was
unchanged from the February unemployment rate which was
down from 5.7% in January. As shown in the graph above,
unemployment has been on a relatively stable decline since
201026
. Because of this trend and the continued improvement in
the economy, we forecast the unemployment rate to take a slight
drop in the next 4-6 months to 5.3%. Moving forward, in the
next 2-3 years we predict the trend to continue and for the
unemployment rate to drop under 5% for the first time since
February 2008 and come in at 4.8%. This trend will show to
have a positive effect on Alcoa’s performance in the coming
years.
Gross Domestic Product
Over the next three to five years, we are expecting the US
economy to regain its strength from the past recession with
growth projected to reach 3% by 2016 and to continue on a slow
growth rate. With no forerunners in the economy forecasted to
have substantial growth that will carry the US economy forward,
we look to international trade and consumer and government
spending as our indicators.
When looking at international trade, we are expecting strong
increases in import and exports despite continued trouble in
Europe and the Middle East. With a strong surge in consumer
spending outlook, fueled by anticipated increases in employment
gains and an increasing national minimal wage, we expect
imports to respond positively. While exports will increase in
responses to President Obama’s proposed goal of doubling US
exports within the next five years17
. Government spending is
forecasted to remain subdued in the short term as a result of
Important disclosures appear on the last page of this report. 2 | P a g e
Economic Analysis
Bureau of Labor Statistics

budget cuts implemented to pass an increase in the debt ceiling.
Additionally, defense spending is projected to wane20
. However,
these savings will be offset by a rise in domestic spending in the
later years of the outlook period as greater tax revenues from a
healthier economy allow for heightened expenditures,
particularly on social security and healthcare.
This will be a strong revenue generator for industrials that are
dealing in the consumer products and for companies with
expansive dealings with countries overseas like Alcoa.
St. Louis FRED
Foreign Exchange Market
The foreign exchange market is a critical component to
industrials that own and operate manufacturing operations
multiple countries all over the globe. Slight changes in foreign
currency price ratios can cause major changes in revenue
forecasts and earnings estimates.
Form a short-term perspective for the EUR/USD we observe a
continuing decreasing trend in the price, falling to lows of 1.02
to even parity in some forecasts for the six to eight month
outlook. This can be contributed to declining confidence in
US Federal interest rate policy set for September and
monetary easing in effect with Greece still uncertain. The
infusion of monetary funds from the ECB correlate with
falling trends and adhere to our analysis of a short term
downtick19
. With seemingly increasing growth for the US, there
are still concerns of unlikely Federal Reserve policy change
and possible new taxes on corporate funds held overseas,
which provoke a negative effect on the EUR.
With the governmental and economic reform policies that the
Eurozone and especially Greece have enacted and plan to initiate
in the coming future, we believe that we will see stronger growth
than this year’s .08% to the US 2.4%. We can expect with the
ECB bonds program to sustain Greece to an elevated economic
plateau where they can start relieving debt, increasing exports
and invite a slow increase in inflation solidifying Greece
participation in the Euro and well needed correction for Greece’s
economy.
That being said, our long term outlook for the EUR/USD will
see strong rebounds to levels of 1.12.
St Louis FRED
Oil Market
The energy market, specifically looking at oil is a significant
component of the economic outlook for Alcoa. This due to the
heavy utilization of the commodity to fuel their manufacturing
and production facilities across the globe.
Looking at our short-term for the oil futures market, we see
prices increasing from their current levels of around 46.00/bbl.
to 58.00/bbl. within four to six months. Over the past months,
we have been observing a strengthening decline in oil prices due
to the increasing production and increasing amount of oil
reserves.
We are confident that the oil futures market has bottomed out
and we can expect oil prices to steadily climb. Current producers
of oil have been operating at deficits for months and they are
starting to feel the pressure on their revenues. Many countries
including the United States and the Eurozone’s breakeven point
on oil is around 65.00/bbl. whereas other countries like Russia
are even higher at 73.00/bbl15
.
Looking at our long-term analysis of oil futures, we are
predicting that oil prices rise to 76.00/bbl. over that two to three
year period. As we observe events in the Middle East subside
and new relationships form, we will see compromises develop in
the realm of oil which will lead to the decrease in the production
therefore the supply of oil, effectively having prices rise to
normal levels at perpetuity.
3 | P a g eImportant disclosures appear on the last page of this report

This will effect industrials when securing future oil contracts and
in their hedging efforts for the long term. Companies are going
to purchase abnormally high amounts of oil futures while prices
are low. As we see oil prices rise in the next five years, they will
use those futures to observe long term constant low oil costs,
curbing manufacturing costs for the long term.
Aluminum Trends
Alumina is projecting strong growth in the years ahead. The
world price of aluminum is going to observe a strong annual
growth rate of 1.7% over the next five years1
. This is due to
increasing demand of aluminum from multiple industries
including car manufacturers and the food industry.
Aluminum
The aluminum industry consists of companies that engage in the
acts from alumina collecting, processing, and manipulating
aluminum bi-products. According to GICS classifications,
Alcoa belongs to the Basic Metals sector, and more specifically
in the Aluminum subsector. Other than Alcoa, the key players in
this industry are Novelis Inc., Kaiser Aluminum Corporation,
Constellium, Noranda Aluminum Inc. and Century Aluminum
Company1
. The key drivers for this industry include the world
price of aluminum, demand from the automotive industry, and
general production metrics observed from the global economy1
.
Industry Trends and Drivers
IBISWorld Industry Analysis
Car manufacturers are expected to expand over the next five
years and with that there has been a strong push towards eco-
friendly, lightweight, and fuel efficient vehicles. Many of the
innovations in this area are trending towards the increased use of
aluminum products in their cars specifically for decreasing
weight which increases fuel efficiency24
.
With increasing consumer spending forecasts, consumers have
the ability to spend more money on food which will result in a
larger demand for canned food products, leading to increased
aluminum needs for manufactures in this space. With increased
spending on food, a large percentage of that increase will be on
aluminum packaged food which will resonate in the metal can
manufacturing industry requiring manufactures to increase
alumina purchasing.
For Alcoa, the manufacturing of alumina will no longer be a
significant part of their current business segments due to large
competition and miniscule margins, although the rising costs of
aluminum will still affect their bottom line. Alcoa is moving to
purchasing instead of manufacturing to sustain their downstream
production. For companies in this space, you will see rising costs
for utilization and increasing revenues from the sale of the good.
The Aluminum Manufacturing industry has endured significant
volatility over the past five years due to fluctuations in
aluminum prices, which reflect global supply and demand
trends. While higher prices raise the cost of refining purchased
aluminum, cost increases are generally passed on to customers
and usually result in higher industry revenue. Aluminum prices
surged after the recession in response to rapidly rising demand
from manufacturers, especially in emerging economies. Higher
prices for aluminum products and rebounding demand from
major markets, namely the automotive industry, bolstered
revenue over past years and the trend will continue into the
future.1
Despite overall revenue growth, weakened demand from major
markets and volatility in aluminum prices contributed to a more
competitive environment over the past five years. Many
operators exited the industry or were acquired by larger
manufacturers. Furthermore, companies continued to expand
operations overseas and merge with foreign manufacturers to
take advantage of stronger demand and lower labor costs in
developing economies. However, the sharp appreciation of the
US dollar has hurt demand for exports in recent years, while
simultaneously boosting the competitiveness of imports.1
Industry/Competitive Analysis
1

The industry is expected to continue to grow as US and global
construction and manufacturing markets gain strength. In
particular, rising demand from automakers will be a major driver
of industry growth. Since aluminum is a lighter alternative to
other metals, car manufacturers are increasingly using it for
building motor vehicle bodies and parts to meet growing fuel-
efficiency standards. As automakers expand production of
lightweight vehicles, this growing market will support higher
demand and prices for aluminum. Over the five years to 2020,
industry revenue is forecast to increase at an average annual rate
of 2.7% to $49.6 billion.1
Threat of New Entrants
Due to the level of saturation in the aluminum industry, new
companies emerging in this sector is unlikely. Alcoa is currently
the leader in terms of market share with 12.5%, followed by
Novelis Inc. with 8%. The next industry leader is Kaiser
Aluminum Corporation with 3%, suggesting that the remaining
77% is widely spread between a numerous amounts of firms1
.
Sourcing and startup costs for this industry are also quite large,
which further lessens the probability of a new firm to enter
aluminum.
Threat of Substitute Products
Increasing steel prices are a positive for Alcoa as manufactures
will move to look for less expensive options for their products
and will be matched by increasing usage in the automotive
industry that are using aluminum as a lightweight material for
production.
Bargaining Power of Customers
The aluminum industry is heavily diluted with 432 companies
that are able to produce the commodity and with that much
competition among firms; prices are driven to margin stressing
levels1
. Customers are then able to shop around until they can
find the best deals at the commodity level; this however is not
the case at the primary and specialty levels where capabilities are
highly specialized.
Bargaining Power of Suppliers
The market of substitute products for aluminum is primarily
steel. Steel prices are influenced by the housing and automotive
industries and by general economy growth. IBIS World forecasts
that in the next two years, global steel prices are going to grow
at a staggering 13.2% and 18% for 2016 and 2017 respectively
then drop to a long-term annual rate of 4%1
. We see this as due
to anticipated growth in multiple industry segments including
recovering economies, accelerating industrial production in the
housing and automotive industries and decreasing excess
capacity of the material. As the US and European economies
being to recover, we will see increasing import and export
opportunities in conjunction with a growing automotive industry
and a recovering housing market that will entice a larger demand
for steel in the upcoming years. Moreover, excess capacity is
anticipated to be removed which will limit overproduction and
put an upward pressure on steel prices25
.
The power of the suppliers lies solely in their specialized
aluminum products that make up the majority of their product
mix as you can see below. Intellectual property and being able to
be flexible in manufacturing methods in terms of being able
to differentiate within this market.
IBISWorld Industry Analysis
Porters Five Forces Analysis

Third-party sales for
declined 4% in 2013 c
Intensity of Competitive Rivalry
The competitive space that makes up the aluminum market is
comprised of competition over sources of raw materials and
attempts to gain contracts with new customers. With the limited
amount of resources for these companies to use, it limits
potential expansion. The companies that own the claims to these
resources are better positioned against their competition. The
companies that are better-equipped and are more flexible in
production capabilities are those who are going to be more
competitive in gaining new production contracts and being able
to expand and gain market share over their competitors. Having
access to the resources and the capabilities to produce large
quantities and develop new products will lead to higher success
in this industry among their rivals.
EXECUTIVESUMMARY
Alcoa is a multi-national innovative metals company working
primarily with aluminum with stakes in titanium, nickel, and
aluminum alloys. They have 60,000 employees in 30 countries
with approximately 50% foreign sales4
.
The past year saw meaningful EPS growth from $0.33 in 2013 to
$0.92 in 2014 realizing the benefit of extensive expansionary
efforts in 20132,4
. Organic growth continued in 2014 pushed
forward by the acquisition of Firth Rixon who specializes in
aerospace grade materials and brings a multi material component
to Alcoa’s aerospace division. In addition to solid growth and
acquisitions, Alcoa recently completed their fourth consecutive
earnings beat.2
On account of a challenging aluminum pricing environment in
recent years Alcoa has repositioned their portfolio to a leaner
upstream portfolio with stronger emphasis on higher margin
product segments as well as a commitment to compete in price
rather than volume. Decreases in oil prices have proved to be a
tailwind where Alcoa uses oil to power their smelting operations
which is likely to continue in the 6-18 month range. Oil makes
companies that operate as pure plays in commodities or specialty
metals. The upstream production business sells slightly over
half of production to 3rd parties while the remainder is used to
supply downstream segments supplemented by 3rd party
aluminum.4
Over the past 5 years Alcoa has repositioned their
product portfolio to a higher weight on downstream businesses
while becoming leaner in their upstream production to better
compete on price in a challenging metals market.
Product Lines and Markets
Global rolled products, primary metals, engineered products and
solutions and alumina and chemicals make up the four product
segments of Alcoa at 31%, 29%, 21% and 15% of global sales
respectively4
.
3
The primary business of Alcoa’s Global Rolled Products
segment is in the production and sale of aluminum plate, sheet,
and specialty foil. This segment includes rigid container sheet
(RCS), which is sold directly to customers in the packaging and
consumer market. This segment also includes sheet and plate
used in the aerospace, automotive, brazing, commercial
transportation, and building and construction markets. For
Alcoa, this segment is the largest portion of their corporate
revenues of $7.14bil4
. Alcoa has done a large amount of
development in this department expanding production
capabilities of their alumina manufacturing plans with
investments of $575mil and entertaining corporate buyouts and
global partnerships with China Power Investment Corporation,
Ma’aden Rolling Company, and new operations in Saudi Arabia.
the Global Rolled Products segment
up approximately 25% of their total alumina energy costs4
. ompared with 2012, primarily driven by
Strengthening U.S. currency against other nations creates a
substantial headwind to foreign sales which comprise 50% of
sales4
. Weakened foreign sales will continue to create a drag on
foreign business as the Euro and other currencies continue to
degrade.
Overview
Alcoa is one of few integrated aluminum companies with sales
split approximately 50-50 domestic vs foreign. An integrated
aluminum company competes in both the upstream commodity
businesses and the downstream specialized materials businesses
supplying aluminum for aerospace and auto unlike other
unfavorable pricing, mostly due to a decrease in metal prices,
and unfavorable product mix, partially offset by increased
demand4
. Volume improvements were mostly due to the
packaging, automotive, and building and construction end
markets, partially offset by a decline in the industrial products
end market.
Engineered Products and Solutions represents Alcoa’s
downstream operations and includes titanium, aluminum, and
super alloy investment castings; fasteners; aluminum wheels;
integrated aluminum structural systems; architectural extrusions;
and forgings and hard alloy extrusions. These products, which
are used in the aerospace, automotive, building and construction,
Company Analysis
Alcoa 10k

commercial transportation, power generation, and industrial
markets, are sold directly to customers and through distributors.
Engineered Products and Services (EPS) makes up 25% of their
sales totaling around $5.1bil4
. Alcoa has ambitious plans to
expand its aluminum lithium capacity and its production
capabilities in plants in the United States and the UK5
. This is
due to the increasing demand that Alcoa is facing within this
segment and they forecast growth with the capture of this market
share.
Primary Metals holds a large portion of Alcoa’s upstream
operations and consists of Alcoa’s worldwide smelter system.
Primary Metals receives alumina, mostly from the Alumina
segment, and produces primary aluminum used by Alcoa’s
fabricating businesses, as well as sold to external customers and
traders. Results from the sale of aluminum powder, scrap, and
excess power are also included in this segment, as well as the
results of aluminum derivative contracts and buy/resell activity.
Primary aluminum produced by Alcoa and used internally is
transferred to other segments at prevailing market prices. The
sale of primary aluminum represents more than 90% of this
segment’s third-party sales which brings in almost $6.1billion in
revenues4
.
Alumina and chemicals mainly consist of the land, process and
production of the material used to create Alumina, Bauxite.
When evaluating this section of Alcoa, it is important to see
where the resources that the company makes are being allocated
to. In this case, a little over 50% of the Alumina is sold off to
third party companies while the rest is allocated back into
Alcoa’s other business segments to supply them with that
resource. When analyzing the reserves of Bauxite that Alcoa
holds they do not directly state the amount, though they
consumed 48 million metric tons of the substance 41 million of
which are from their own reserves. From a statement from
management in their 10-k, “They (Alcoa) believe its present
sources of bauxite on a global basis are sufficient to meet the
forecasted requirements of its alumina refining operations for the
foreseeable future”4
Recent Earnings Analysis
Diluted EPS for 2014 was $0.21, compared to 2013’s diluted
EPS of ($2.14)4
. It is important to note that in 2013 the company
faced an impairment in goodwill, as well as incurred high
expansion costs - both contributing to negative earnings on the
year. Another large factor impacting the earnings for Alcoa is
derived from their business model, where cost of goods sold is a
high percentage of their total revenues. The fourth quarter (un-
annualized) percentage of revenues for COGS was reported in
the quarterly update as 78%, improving from Q4 of 2013’s
percentage of 84.3%. We believe the cause of this is due to who
their customers are. Companies like Boeing and Ford who use
aluminum-based products for their own production also need to
create margins on their products. Because of this fact, the price
Alcoa charges must be relatively low to their competition in
order to keep these large customer bases. In terms of quarterly
revenues, Q4 of 2014 increased year over year by 14%; again
showing that they are beginning to reap the rewards of the large
expansion costs that were incurred in 20134
.
This upward trend began in Q2 of 2014, when they reported a
quarterly net income of $138 million (EPS $0.12) mostly driven
by a record breaking ATOI in the engineered products and
solutions segment of $204 million4
. The other segments of the
business flourished as well, with global rolled products’ ATOI
increasing 34% from the previous quarter and primary metals &
alumina products improving performance for the 11th
consecutive quarter4
. The trend continued in the third quarter
with a year over year growth in quarterly revenues of 8%, where
second quarter year over year revenue growth was steady.
Global rolled products ATOI continued to increase, with a year
over year growth of 45%.
Looking forward, management projects the upward trend for
Alcoa to continue. They foresee demand in all of their markets
to increase from 2014. Specifically global aerospace sales are
projected to increase between nine and ten percent, derived from
demand for commercial and regional jets and the engines that
power them. Automotive is projected to continue a steady
increase between two and four percent, as well as global
packaging growth between two and three percent. The trucking
industry had a good showing in 2014, therefore management
projects the industry to grow between three and seven percent in
North America. The industrial gas turbine industry fell last year
and is expected by management to rebound in 2015 with growth
between one and three percent. The largest factor affecting
Alcoa is the growth in global aluminum demand, which
management projects to be the same as it was in 2014 at seven
percent growth. The only potential negative in Alcoa’s report in
regards to 2015 was in the commercial transportation industry,
which managements projection was between negative one
percent change and a positive three percent change5
.
Overall, management sees 2015 to be a great year for Alcoa
moving forward. While it is management’s duty to be optimistic
for shareholder’s sake, we generally agree with the trends that
they are projecting just not to the same extent. Alcoa is still
recovering from the major expansion costs in 2013, and growing
sales in these segments will continue to reflect in 2015 the effect
that was had on 2014 sales.
Alcoa prides their products in innovation, and the innovations
made in their aluminum-based products that are being sold are
focused on lighter-weight for their respective uses. For example,
in the automotive industry the focus on consumers is being
shifted towards efficiency and higher gas mileage. One way that
this is obtained is through lighter weight vehicles, and is
achieved through using products that Alcoa provides to
manufacturers such as Ford. Their projection for aerospace sales
is derived from the acquisition of Firth Rixon and their
specialization in this industry. However nine to ten percent
seems rather high, and we foresee the projection for 2015 to be
closer to six and eight percent. The projections for the other
industries seems rather conservative in comparison to these two
mentioned, and we agree with the reasonableness of
management’sprojections.

CATALYSTS FOR GROWTH/CHANGE
A key growth driver for Alcoa is the demand for aluminum; this
is forecasted to grow 7-8%24
over the next year as auto
manufacturers’ outputs increase and consumption in China
continues to grow. In addition, the price is forecasted to increase
due to supply cutbacks; many smelters were shut down outside
of China. These cutbacks began for Alcoa in 2007; since then
they have removed 31% of their high-cost smelters4
.
An additional growth catalyst will be a business strategy that
increasingly focuses on value-added products rather than raw
materials. Value-added products allow Alcoa to differentiate
themselves from competitors and prevent being price-takers in
the market. These products typically earn much higher margins
than raw materials as well. According to Alcoa’s 10K, 58% of
Alcoa’s sales came from Global Rolled Products and Engineered
Products and Solutions in 2014; given the increased value-added
segment CapEx and decreasing materials CapEx shown in the
graph below, we believe that this percentage will continue to
increase4
.
S.W.O.T ANALYSIS
Strengths
Vertically Integrated Operations
As one of few integrated aluminum companies Alcoa is well
positioned to maintain a market leading position across product
segments. Through the combination of streamlined upstream
segments operating at higher margins and strong acquisitions
and growth in downstream aerospace and auto segments they are
protected from commodity pricing while poised to take
advantage of growing aerospace demands and aggressively bid
automotive contracts, like the F-150 and 2018 Camry4
.
Weaknesses
FinancialPerformance
While the most recent year was marked by four straight
quarterly earnings beats, in 2011 and 2012 they struggled due to
restructuring and input headwinds4
. On account of past
performance they have struggled to regain investor confidence
despite strong acquisitions and financial performance in recent
years.
Opportunities
Automotive Industry
A strong movement in auto motive’s transitioning from the use
of steel to manufactured, lightweight aluminum products is a
large opportunity for Alcoa to bid additional contracts to supply
automakers who are eager to produce lower weight, higher
mileage vehicles. Alcoa is already among the suppliers for the
Ford F-1504
.
Aerospace Opportunity
The aerospace industry is rapidly adopting new technologies to
increase the efficiency of their fleets by utilizing new
technologies in engines and materials. By utilizing lightweight
materials that can provide equal or superior performance while
also utilizing a smaller footprint they are able to greatly increase
fuel efficiency through weight reduction and aerodynamic
increases24
. In addition, new engine technology often generates
heat exceeding the melting temperatures of common alloys used
in the industry however coatings and specialized materials can
overcome this issue creating another opportunity within the
aerospace sector for specialized materials producers such as
Alcoa.
Threats
Energy Costs
Some of Alcoa’s smelting sites are fueled by oil which has
proven to be a substantial headwind in recent months however
could become a significant negative if energy prices were to
begin to climb back up to previous levels. We have forecasted
that oil will likely remain near current levels in the 6-12 month
time frame however we believe prices will rise towards $75-
80/barrel in the 12-24 month time horizon which would create a
drag on upstream revenues on account of higher input and
energy costs.
Currency Risk
Alcoa reports that approximately 50% of their revenues are
generated in foreign countries4
which leaves them exposed to an
increasing currency risk as the U.S. dollar continues to
strengthen and the Euro approaches parity with USD. It is likely
that current exchange rates could create a low single digit
percent drag on foreign revenues which could be further
exacerbated over the next year if exchange rates do not begin to
stabilize in the near term.
Revenue Decomposition
We forecasted Alcoa’s segment sales based on historical
shipments in tons, and those segments’ revenue per ton. Our
team believes that given Alcoa’s reduced smelting capacity and
recent acquisitions of Firth Rixson and RTI Metals, their
alumina shipments, as a percent of their total shipments, will
decrease from 69.19% of shipments to 65.07% of shipments in
2017, after which the percentage holds constant. Their Global
Rolled Products and Engineered Solutions segments will
increase from 2014-2017 from 12.76% of shipments to 15.66%,
and from 1.6% to 2.37% respectively. These growth rates are a
results of Alcoa’s continuing focus on downstream production of
value-added products. We expect Primary Metals’ shipments to
first decrease from 16.46% to 15.81%, then to return back to
16.9% by 2017. This initial decrease will result from cut
smelting capacity, then normalize as titanium sales increase and
aluminum demand increases due to automotive OEM and
aerospace growth.
Valuation Analysis

We calculated a 5.18% CAGR over the next 7 years, with a CV
growth rate of 2%. Our strong CAGR results from increasing
demand for specialized metals and metal products, particularly
in aerospace and automotive markets. Not only will the
automotive market expand, but it will increase its dependence on
aluminum products as OEMs continue to increase fuel
efficiency. Alcoa already has contracts with Ford and Toyota to
be their supplier of aluminum in 2017 (investor presentation).
Critical Assumptions
WACC
We calculated Alcoa’s WACC at 9.88%. Their cost of equity
under the CAPM is 13.41%, and cost of debt is 3.86%. The
relatively high cost of debt is due to a low debt rating from Fitch
and Morningstar of BB+ (Reuters, Morningstar). Their high cost
of equity results from a high beta due to the stock price’s
volatility over the past five years. We believe the WACC
accurately represents Alcoa’s cost of capital, given their debt
rating and historical volatility. Our team forecasts their WACC
to remain constant over the next seven years as interest rates rise
but their stock volatility stabilizes.
CV Growth
We believe Alcoa’s terminal sales growth rate to be 2%. Over
the next seven years, Alcoa will essentially capture market share
from steel producers as OEMs and aerospace switch to high-
quality aluminum and other metals. However, once their market
share stabilizes and their growth rate is only due to industry
expansion, they will grow with the economy. We expect stable
economic growth at the end of our forecast horizon, so 2%
tracks GDP at that point.
DCF/EP Valuation
Our DCF model produces an intrinsic value of $20.80 per share.
We believe this is on the upper limit of their potential stock
price, and therefore based our target price range of $18-20 on
this model. Alcoa will see strong free cash flow growth over the
next seven years resulting from greater efficiency in upstream
production and a focus on higher margin segments. This growth
will result in consistent revenue growth and improving margins.
Dividend Discount Model
Our DDM analysis returned a stock price of $14.47. Alcoa has
had a historically low dividend payout ratio, and we forecast it to
continue at 13.3%. Therefore, our team does not believe that
Alcoa derives its value from paying dividends to shareholders,
and this model does not represent their stock price.
Relative P/E
The relative price-to-earnings analysis generated a price of
$16.11. This is due to Alcoa trading at a P/E of 12.71, with an
industry average of 15.34. Although our target price is higher,
we believe this low P/E reflects Alcoa’s stock being
undervalued. Alcoa’s current multiple represents pessimism and
uncertainty regarding their ability to execute on their
restructuring moving forward. However, we believe that Alcoa
should trade at a premium and are poised to outperform current
market beliefs.
Sensitivity Analyses
Cost of Equity vs. CV Growth
This table shows the sensitivity of our DCF model to changes in
CV growth and cost of equity. It indicates that, given our
valuation, the intrinsic price will stay above current prices even
after a 2% increase in cost of equity and a 1.5% drop in terminal
growth. In addition, if Alcoa is able to stabilize their cost of
equity by reducing their volatility, or their mature growth rate is
higher than anticipated, they could be even more undervalued
than we currently believe.
CV Growth
20.81 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0%
CostofEquity 10% $ 28.26 $ 29.39 $ 30.72 $ 32.30 $ 34.21 $ 36.58 $ 39.58
10.50% $ 26.62 $ 27.59 $ 28.73 $ 30.06 $ 31.66 $ 33.62 $ 36.05
11% $ 25.12 $ 25.96 $ 26.93 $ 28.06 $ 29.41 $ 31.03 $ 33.03
11.50% $ 23.74 $ 24.47 $ 25.30 $ 26.27 $ 27.41 $ 28.76 $ 30.41
12% $ 22.48 $ 23.10 $ 23.82 $ 24.65 $ 25.61 $ 26.75 $ 28.12
12.50% $ 21.30 $ 21.85 $ 22.46 $ 23.17 $ 23.99 $ 24.96 $ 26.10
13% $ 20.21 $ 20.69 $ 21.22 $ 21.83 $ 22.53 $ 23.34 $ 24.30
13.41% $ 19.38 $ 19.80 $ 20.27 $ 20.81 $ 21.43 $ 22.14 $ 22.97
13.50% $ 19.20 $ 19.61 $ 20.07 $ 20.60 $ 21.19 $ 21.89 $ 22.69
14% $ 18.26 $ 18.62 $ 19.01 $ 19.46 $ 19.98 $ 20.56 $ 21.25
14.50% $ 17.38 $ 17.69 $ 18.03 $ 18.42 $ 18.86 $ 19.36 $ 19.93
15% $ 16.56 $ 16.82 $ 17.12 $ 17.45 $ 17.83 $ 18.25 $ 18.74
Cost of Equity vs. Dividend Yield
Our team decided to test the sensitivity of our DCF price to
dividend yield and cost of equity changes in order to analyze
price effects from increasing cash returns to shareholders. Due to
Alcoa’s low earning base, an increase in the dividend payout
will not cause a significant change in price. Therefore, it may be
feasible for Alcoa to begin paying dividends to shareholders in
the near future.
DividendYield
20.81 0.25% 0.50% 0.76% 10.00% 20.00% 30.00% 40.00%
CostofEquity 10% $ 32.35 $ 32.32 $ 32.30 $ 31.44 $ 30.45 $ 29.38 $ 28.21
10.50% $ 30.10 $ 30.08 $ 30.06 $ 29.27 $ 28.35 $ 27.36 $ 26.28
11% $ 28.10 $ 28.08 $ 28.06 $ 27.33 $ 26.47 $ 25.55 $ 24.55
11.50% $ 26.31 $ 26.29 $ 26.27 $ 25.58 $ 24.79 $ 23.93 $ 23.00
12% $ 24.68 $ 24.66 $ 24.65 $ 24.00 $ 23.26 $ 22.46 $ 21.59
12.50% $ 23.20 $ 23.19 $ 23.17 $ 22.57 $ 21.88 $ 21.13 $ 20.32
13% $ 21.86 $ 21.84 $ 21.83 $ 21.27 $ 20.61 $ 19.91 $ 19.15
13.41% $ 20.84 $ 20.83 $ 20.81 $ 20.28 $ 19.66 $ 18.99 $ 18.27
13.50% $ 20.63 $ 20.61 $ 20.60 $ 20.07 $ 19.46 $ 18.80 $ 18.08
14% $ 19.49 $ 19.48 $ 19.46 $ 18.97 $ 18.39 $ 17.77 $ 17.10
14.50% $ 18.44 $ 18.43 $ 18.42 $ 17.95 $ 17.41 $ 16.83 $ 16.20
Cost of Equity vs. Cost of Debt
We wanted to test these two variables because they are
fundamental to Alcoa’s cost of capital. In addition, we forecast
an increasing cost of debt as interest rates rise, but a falling cost
of equity as Alcoa’s beta declines in the future. Their price is
more sensitive to their cost of equity, given that equity is 67% of
their enterprise value. This bodes well for Alcoa, as they can
weather these interest rate hikes while still maintaining their
WACC.

Costof Debt
20.81 2.50% 3% 3.50 3.86% 4.00% 5%
Costof Equity 10% $ 36.56 $ 34.89 $ 33.34 $ 32.29 $ 31.90 $ 30.56
10.50% $ 33.83 $ 32.36 $ 30.99 $ 30.06 $ 29.71 $ 28.50
11% $ 31.43 $ 30.12 $ 28.89 $ 28.06 $ 27.74 $ 26.66
11.50% $ 29.29 $ 28.12 $ 27.01 $ 26.26 $ 25.98 $ 25.00
12% $ 27.37 $ 26.32 $ 25.32 $ 24.64 $ 24.38 $ 23.50
12.50% $ 25.64 $ 24.69 $ 23.79 $ 23.17 $ 22.93 $ 22.12
13% $ 24.08 $ 23.21 $ 22.39 $ 21.82 $ 21.61 $ 20.87
13.41% $ 22.91 $ 22.10 $ 21.33 $ 20.81 $ 20.61 $ 19.91
14% $ 21.36 $ 20.63 $ 19.94 $ 19.46 $ 19.28 $ 18.65
14.50% $ 20.17 $ 19.50 $ 18.86 $ 18.42 $ 18.25 $ 17.67
15% $ 19.07 $ 18.45 $ 17.86 $ 17.45 $ 17.29 $ 16.75
2015 P/E Ratio vs. Industry Average P/E
This table tests Alcoa’s relative P/E price to changes in their
2015 earnings, and fluctuations in industry average P/E ratios. If
Alcoa posts even a five cent earnings beat, relative to our
expected EPS, their stock price could see significant growth.
This of course means an earnings miss could severely drop their
price.
16.11
2015 EPS
0.9 0.95 1 1.05 1.1 1.15 1.2 1.25
Avg 2015 P/E 12.5 11.25 11.88 12.50 13.13 13.75 14.38 15.00 15.63
13 11.70 12.35 13.00 13.65 14.30 14.95 15.60 16.25
13.5 12.15 12.83 13.50 14.18 14.85 15.53 16.20 16.88
14 12.60 13.30 14.00 14.70 15.40 16.10 16.80 17.50
14.5 13.05 13.78 14.50 15.23 15.95 16.68 17.40 18.13
15 13.50 14.25 15.00 15.75 16.50 17.25 18.00 18.75
15.34 13.81 14.57 15.34 16.11 16.87 17.64 18.41 19.18
16 14.40 15.20 16.00 16.80 17.60 18.40 19.20 20.00
16.5 14.85 15.68 16.50 17.33 18.15 18.98 19.80 20.63
17 15.30 16.15 17.00 17.85 18.70 19.55 20.40 21.25
17.5 15.75 16.63 17.50 18.38 19.25 20.13 21.00 21.88
18 16.20 17.10 18.00 18.90 19.80 20.70 21.60 22.50
18.5 16.65 17.58 18.50 19.43 20.35 21.28 22.20 23.13

Important Disclaimer
This report was created by students enrolled in the Applied
Equity Valuation (6F:112) class at the University of Iowa. The
report was originally created to offer an internal investment
recommendation for the University of Iowa Krause Fund and its
advisory board. The report also provides potential employers and
other interested parties an example of the students’ skills,
knowledge and abilities. Members of the Krause Fund are not
registered investment advisors, brokers or officially licensed
financial professionals. The investment advice contained in this
report does not represent an offer or solicitation to buy or sell
any of the securities mentioned. Unless otherwise noted, facts
and figures included in this report are from publicly available
sources. This report is not a complete compilation of data, and
its accuracy is not guaranteed. From time to time, the University
of Iowa, its faculty, staff, students, or the Krause Fund may hold
a financial interest in the companies mentioned in this report.

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Alcoa
Revenue Decomposition
Fiscal Years Ending Dec. 31 2012 2013 2014 2015E 2016E 2017E 2018E 2019E 2020E CV (20xx)
Revenue by Product Segment
Primary Metals 10,309 9,217 9,731 9,538 9,712 9,964 10,762 11,623 12,204 12,509
Flat-Rolled Products 7,541 7,284 7,536 8,221 8,913 9,680 10,454 11,290 11,855 12,151
Engineered Solutions 5,525 5,733 6,006 6,903 7,756 8,826 9,532 10,294 10,809 11,079
Alumina 5,402 5,561 5,450 5,397 5,388 5,409 5,842 6,309 6,625 6,790
Adjustment (5,077) (4,763) (4,817) (4,958) (5,162) (5,409) (5,842) (6,309) (6,625) (6,790)
Packagingand Consumer -- -- -- 0 0 0 0 0 0 0
Total 23,700 23,032 23,906 25,101 26,607 28,470 30,747 33,207 34,868 35,739
Segment % of Sales 5% 6% 7% 8% 8% 5% 2%
Primary Metals 0.43 0.40 0.41 0.38 0.37 0.35 0.35 0.35 0.35 0.35
Flat-Rolled Products 0.32 0.32 0.32 0.33 0.34 0.34 0.34 0.34 0.34 0.34
Engineered Solutions 0.23 0.25 0.25 0.28 0.29 0.31 0.31 0.31 0.31 0.31
Alumina 0.23 0.24 0.23 0.22 0.20 0.19 0.19 0.19 0.19 0.19
Adjustment (0.21) (0.21) (0.20) (0.20) (0.19) (0.19) (0.19) (0.19) (0.19) (0.19)
Packagingand Consumer
2012 2013 2014 2015E 2016E 2017E 2018E 2019E 2020E CV 20xx
Shipments/Sales (in Metric Tons)
Primary Metals 3,056 2,801 2,534 2,471 2,503 2,555 2,759 2,980 3,129 3,207
Flat-Rolled Products 1,867 1,905 1,964 2,086 2,206 2,367 2,556 2,761 2,899 2,971
Engineered Solutions 222 229 246 282 315 358 387 418 438 449
Alumina 9,295 9,966 10,652 10,794 10,166 9,835 10,622 11,472 12,045 12,346
Total 14,440 14,901 15,396 15,633 15,191 15,115 16,324 17,630 18,511 18,974
Revenue/Metric Ton (Thousands of $)
Primary Metals 3.37 3.29 3.84 3.86 3.88 3.90 3.90 3.90 3.90 3.90
Flat-Rolled Products 4.04 3.82 3.84 3.94 4.04 4.09 4.09 4.09 4.09 4.09
Engineered Solutions 24.89 25.03 24.41 24.51 24.61 24.65 24.65 24.65 24.65 24.65
Alumina 0.58 0.56 0.51 0.50 0.53 0.55 0.55 0.55 0.55 0.55
Segment % of Shipments
Primary Metals 21.16% 18.80% 16.46% 15.81% 16.48% 16.90% 16.90% 16.90% 16.90% 16.90%
Flat-Rolled Products 12.93% 12.78% 12.76% 13.35% 14.52% 15.66% 15.66% 15.66% 15.66% 15.66%
Engineered Solutions 1.54% 1.54% 1.60% 1.80% 2.07% 2.37% 2.37% 2.37% 2.37% 2.37%
Alumina 64.37% 66.88% 69.19% 69.04% 66.92% 65.07% 65.07% 65.07% 65.07% 65.07%

Alcoa
Balance Sheet
Fiscal Years Ending Dec. 31 2012 2013 2014 2015E 2016E 2017E 2018E 2019E 2020E 2021E
Balance Sheet
Assets
Cash 1,861 1,437 1,877 4,984 5,571 7,358 9,436 11,508 13,165 14,805
Short-Term Receivables 1,739 1,818 2,128 2,234 2,368 2,534 2,737 2,956 3,104 3,181
Inventories 2,825 2,705 3,082 3,058 3,242 3,469 3,746 4,046 4,248 4,355
Progress Payments & Other 263 581 - - - - - - - -
Other Current Assets 1,275 1,009 1,182 1,156 1,226 1,311 1,416 1,530 1,606 1,646
Total Current Assets 7,700 6,969 8,269 11,433 12,407 14,673 17,336 20,040 22,123 23,987
Net Property, Plant & Equipment 18,947 17,639 16,426 16,054 15,816 15,802 15,936 16,134 16,353 16,549
Property, Plant & Equipment - Gross 38,137 36,866 35,728 36,329 37,183 38,484 40,077 41,798 43,606 45,458
AccumulatedDepreciation 19,190 19,227 19,302 20,275 21,367 22,682 24,142 25,664 27,253 28,909
Total Investments and Advances 2,224 2,127 1,944 2,219 2,352 2,517 2,718 2,935 3,082 3,159
Long-Term Note Receivable 408 339 244 194 144 94 44 - -
Net Goodwill 5,170 3,415 5,247 5,247 5,247 5,247 5,247 5,247 5,247 5,247
Net Other Intangibles 407 399 758 715 672 629 586 543 500
Deferred Tax Assets 3,790 3,184 2,754 2,254 1,754 1,254 754 254 -
Other Assets 1,533 1,670 2,759 1,732 1,836 1,965 2,122 2,292 2,406 2,467
Total Assets 40,179 35,742 37,399 39,941 40,320 42,273 44,835 47,532 49,755 51,909
Liabilities & Shareholders' Equity
ST Debt & Curr. Portion LT Debt 518 712 83 721 764 817 883 953 1,001 1,026
Accounts Payable 2,702 2,960 3,152 2,924 3,099 3,316 3,581 3,868 4,061 4,163
Income Tax Payable 366 376 348 147 166 185 214 246 266 306
Other Current Liabilities 2,356 2,057 1,958 2,237 2,371 2,537 2,740 2,959 3,107 3,185
Total Current Liabilities 5,942 6,105 5,541 6,028 6,400 6,856 7,418 8,026 8,436 8,679
Long-Term Debt 8,311 7,607 8,769 9,171 7,645 7,681 7,788 7,925 8,050 8,163
Provision for Risks & Charges 6,325 5,537 5,446 5,067 4,783 4,689 4,689 4,689 4,689 4,689
Deferred Tax Liabilities 460 - - - - - - - - -
Other Liabilities 2,618 2,971 2,849 3,000 3,180 3,403 3,675 3,969 4,168 4,272
Total Liabilities 23,656 22,220 22,605 23,266 22,008 22,628 23,569 24,609 25,342 25,802
Preferred Stock (Carrying Value) 55 55 58 58 58 58 58 58 58 58
Common Stock Par/Carry Value/Additional Paid-I 8,738 8,687 10,588 10,644 10,700 10,757 10,813 10,869 10,925 10,948
Retained Earnings 11,689 9,272 9,379 10,485 11,796 13,260 14,949 16,891 18,996 21,410
Unrealized Gain/Loss Marketable Securities - - -- - - - - - - -
Other Appropriated Reserves (3,402) (3,659) (4,677) (4,665) (4,665) (4,665) (4,665) (4,665) (4,665) (4,665)
Treasury Stock (3,881) (3,762) (3,042) (2,956) (2,872) (3,290) (3,697) (4,342) (5,218) (6,070)
Total Shareholders' Equity 13,199 10,593 12,306 13,566 15,018 16,119 17,458 18,811 20,096 21,681
Accumulated Minority Interest 3,324 2,929 2,488 3,108 3,295 3,525 3,807 4,112 4,317 4,425
Total Equity 16,523 13,522 14,794 16,674 18,312 19,644 21,266 22,923 24,413 26,107
Total Liabilities & Shareholders' Equity 40,179 35,742 37,399 39,941 40,320 42,273 44,835 47,532 49,755 51,909

Alcoa
Income Statement
Fiscal Years Ending Dec. 31 2012 2013 2014 2015E 2016E 2017E 2018E 2019E 2020E CV 20xx
Income Statement
Sales 23,682 23,058 23,906 25,101 26,607 28,470 30,747 33,207 34,868 35,739
COGS excluding D&A 20,484 19,286 19,136 19,994 21,088 22,473 24,176 26,014 27,219 27,443
Depreciation 1,380 1,348 1,289 1,323 1,355 1,402 1,460 1,523 1,588 1,656
Amortization of Intangibles 82 73 83 43 43 43 43 43 43 43
Gross Income 1,736 2,351 3,398 3,741 4,122 4,552 5,068 5,628 6,018 6,598
SG&A Expense 997 1,008 995 1,045 1,011 1,068 1,107 1,162 1,220 1,251
R&D Expense 197 192 218 251 333 427 461 498 523 536
EBIT (Operating Income) 542 1,151 2,185 2,445 2,778 3,057 3,500 3,967 4,274 4,811
Nonoperating Income - Net 315 (23) (47) -- -- -- -- -- -- --
Gross Interest Expense (581) (551) (473) (571) (589) (614) (681) (729) (763) (786)
Unusual Expense - Net (45) (2,492) (1,168) (13) (13) (14) (15) (17) (17) (18)
Pretax Income 324 (1,816) 497 1,862 2,176 2,430 2,804 3,222 3,494 4,007
Forecasted Income Tax Rate 31.5% 30.5% 30.5% 30.5% 30.5% 30.5% 30.5%
Income Taxes 162 428 320 587 664 741 855 983 1,066 1,222
Consolidated Net Income 162 (2,244) 177 - - - - - - -
Minority Interest (29) 41 (91) - - - - - - -
Net Income 191 (2,285) 268 1,275 1,512 1,689 1,949 2,239 2,428 2,785
Preferred Dividends 2 2 21 - - - - - - -
Net Income available to Common Shareholders 189 - - - - - - -
EPS (recurring) 0.20 (0.51) 0.90 1.05 1.25 1.41 1.65 1.94 2.16 2.55
Total Shares Outstanding 1067 1071 1217 1215 1214 1194 1178 1153 1122 1093
Dividends per Share 0.12 0.12 0.12 0.14 0.17 0.19 0.22 0.26 0.29 0.34
Payout Ratio - - - 13.30% 13.30% 13.30% 13.30% 13.30% 13.30% 13.30%

Alcoa
Cash Flow Statement Forecast
Fiscal Years Ending Dec. 31 2015E 2016E 2017E 2018E 2019E 2020E 2021E
Operating Activities
Net Income 1,275 1,512 1,689 1,949 2,239 2,428 2,785
Adjustments for Non-Cash Operating Expenses
Depreciation 973 1,092 1,314 1,460 1,523 1,588 1,656
Change in Receivables (106) (134) (166) (203) (219) (148) (78)
Change in Inventory 24 (184) (227) (278) (300) (202) (106)
Change in Other Current Assets 26 (69) (86) (105) (113) (76) (40)
Change in Deferred Tax Assets 500 500 500 500 500 254 0
Change in Intangible Assets (758) 43 43 43 43 43 43
Change in A/P (228) 175 217 265 286 193 102
Income Tax Payable (201) 19 19 29 32 21 39
Change in Other Current Liabilities 279 134 166 203 219 148 78
Change in Provision for Risks and Charges (379) (284) (95) 0 0 0 0
Change in Other Long-Term Liabilities 151 180 223 272 294 198 104
Total ANCOE 280 1,473 1,909 2,187 2,265 2,019 1,798
Cash from Operating Activities 1,556 2,985 3,598 4,136 4,504 4,448 4,582
Investing Activities
Change in Note Receivable (244) 50 50 50 50 44 0
Capital Expenditures (601) (854) (1,301) (1,594) (1,721) (1,807) (1,852)
Change in LTA 1,027 (104) (129) (157) (170) (115) (60)
Change in Investments and Advancements (275) (133) (165) (201) (217) (147) (77)
Change in Minority Interest 620 186 231 282 305 206 108
Cash from Investing Activities 527 (855) (1,313) (1,620) (1,754) (1,819) (1,882)
Financing Activities
Dividends (170) (201) (225) (259) (298) (323) (370)
Change in ST Debt and Current Portion LTD 638 43 53 65 71 48 25
Change in LTD 402 (1,526) 36 107 137 124 113
Change in Common Stock 56 56 56 56 56 56 23
Share re-purchases/Issuances from Treasury 86 84 (418) (407) (645) (877) (852)
Change in Other Appropriated Reserves 12 0 0 0 0 0 0
Cash from Financing Activities 1,025 (1,544) (497) (438) (679) (971) (1,061)
Change in Cash 3,107 587 1,787 2,078 2,072 1,657 1,640
Beginning Cash 1,877 4,984 5,571 7,358 9,436 11,508 13,165
Ending Cash 4,984 5,571 7,358 9,436 11,508 13,165 14,805

Alcoa
Common Size Income Statement
Income Statement
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
COGS excluding D&A 86.50% 83.64% 80.05% 79.65% 79.26% 78.94% 78.63% 78.34% 78.06% 76.79%
Depreciation 7.11% 7.11% 7.31% 7.85% 8.24% 8.56% 8.87% 9.16% 9.44% 9.71%
Amortization of Intangibles 0.35% 0.32% 0.35% 0.17% 0.16% 0.15% 0.14% 0.13% 0.12% 0.12%
Gross Income 7.33% 10.20% 14.21% 12.33% 12.34% 12.35% 12.36% 12.37% 12.38% 13.38%
SG&A Expense 4.21% 4.37% 4.16% 4.16% 3.80% 3.75% 3.60% 3.50% 3.50% 3.50%
R&D Expense 0.83% 0.83% 0.91% 1.00% 1.25% 1.5% 1.5% 1.5% 1.5% 1.5%
EBIT (Operating Income) 2.29% 4.99% 9.14% 7.17% 7.29% 7.10% 7.26% 7.37% 7.38% 8.38%
Nonoperating Income - Net 1.33% -0.10% -0.20% - - - - - - -
Gross Interest Expense -2.45% -2.39% -1.98% -2.27% -2.21% -2.16% -2.21% -2.19% -2.19% -2.20%
Unusual Expense - Net -0.19% -10.81% -4.89% 0.05% 0.05% 0.05% 0.05% 0.05% 0.05% 0.05%
Pretax Income 1.37% -7.88% 2.08% 4.84% 5.02% 4.89% 5.00% 5.13% 5.14% 6.13%
Income Taxes 0.68% 1.86% 1.34% -1.60% -0.13% -0.86% -0.50% -0.68% -0.59% -0.63%
Consolidated Net Income 0.68% -9.73% 0.74% 3.25% 4.89% 4.03% 4.50% 4.45% 4.55% 5.50%
Minority Interest -0.12% 0.18% -0.38% - - - - - - -
Net Income 0.81% -9.91% 1.12% 3.25% 4.89% 4.03% 4.50% 4.45% 4.55% 5.50%
Preferred Dividends 0.01% 0.01% 0.09% - - - - - - -
Net Income available to Common Shareholders 0.80% 0.00% 0.00% - - - - - - -

Alcoa
Common Size Balance Sheet
Balance Sheet
Assets
Cash & Short-Term Investments 7.86% 6.23% 7.85% 19.86% 20.94% 25.84% 30.69% 34.65% 37.76% 41.42%
Short-Term Receivables 7.34% 7.88% 8.90% 7.97% 7.97% 7.97% 7.97% 7.97% 7.97% 7.97%
Inventories 11.93% 11.73% 12.89% 12.03% 12.03% 12.03% 12.03% 12.03% 12.03% 12.03%
Progress Payments & Other 1.11% 2.52% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Other Current Assets 5.38% 4.38% 4.94% 4.61% 4.61% 4.61% 4.61% 4.61% 4.61% 4.61%
Total Current Assets 32.51% 30.22% 34.59% 44.46% 45.54% 50.45% 55.29% 59.26% 62.36% 66.03%
Net Property, Plant & Equipment 80.01% 76.50% 68.71% 63.96% 59.44% 55.50% 51.83% 48.59% 46.90% 46.31%
Property, Plant & Equipment - Gross 161.04% 159.88% 149.45% 144.73% 139.75% 135.17% 130.34% 125.87% 125.06% 127.19%
Accumulated Depreciation 81.03% 83.39% 80.74% 80.77% 80.31% 79.67% 78.52% 77.29% 78.16% 80.89%
Total Investments and Advances 9.39% 9.22% 8.13% 8.84% 8.84% 8.84% 8.84% 8.84% 8.84% 8.84%
Long-Term Note Receivable 1.72% 1.47% 0.00% 0.97% 0.73% 0.51% 0.31% 0.13% 0.00% 0.00%
Net Goodwill 21.83% 14.81% 21.95% 20.90% 19.72% 18.43% 17.06% 15.80% 15.05% 14.68%
Net Other Intangibles 1.72% 1.73% 0.00% 3.19% 3.01% 2.81% 2.60% 2.39% 2.23% 2.12%
Deferred Tax Assets 16.00% 13.81% 11.52% 13.87% 13.87% 13.87% 13.87% 13.87% 13.87% 13.87%
Other Assets 6.47% 7.24% 11.54% 6.90% 6.90% 6.90% 6.90% 6.90% 6.90% 6.90%
Total Assets 169.66% 155.01% 156.44% 163.09% 158.05% 157.31% 156.70% 155.78% 156.15% 158.75%
Liabilities & Shareholders' Equity
ST Debt & Curr. Portion LT Debt 2.19% 3.09% 0.35% 2.87% 2.87% 2.87% 2.87% 2.87% 2.87% 2.87%
Accounts Payable 11.41% 12.84% 13.18% 11.65% 11.65% 11.65% 11.65% 11.65% 11.65% 11.65%
Income Tax Payable 1.55% 1.63% 1.46% 0.58% 0.62% 0.65% 0.70% 0.74% 0.76% 0.85%
Other Current Liabilities 9.95% 8.92% 8.19% 8.91% 8.91% 8.91% 8.91% 8.91% 8.91% 8.91%
Total Current Liabilities 25.09% 26.48% 23.18% 24.01% 24.05% 24.08% 24.12% 24.17% 24.19% 24.28%
Long-Term Debt 35.09% 32.99% 36.68% 36.54% 28.73% 26.98% 25.33% 23.87% 23.09% 22.84%
Provision for Risks & Charges 26.71% 24.01% 22.78% 25.15% 25.15% 25.15% 25.15% 25.15% 25.15% 25.15%
Deferred Tax Liabilities 1.94% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Other Liabilities 11.05% 12.88% 11.92% 11.95% 11.95% 11.95% 11.95% 11.95% 11.95% 11.95%
Total Liabilities 99.89% 96.37% 94.56% 97.65% 89.88% 88.16% 86.55% 85.13% 84.38% 84.22%
Preferred Stock (Carrying Value) 0.23% 0.24% 0.24% 0.23% 0.22% 0.20% 0.19% 0.17% 0.17% 0.16%
Common Stock Par/Carry Value/Additional Paid-In Capital/Capi 36.90% 37.67% 44.29% 42.41% 40.22% 37.78% 35.17% 32.73% 31.33% 30.63%
Retained Earnings 49.36% 40.21% 39.23% 41.77% 44.33% 46.57% 48.62% 50.86% 54.48% 59.91%
Unrealized Gain/Loss Marketable Securities 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Other Appropriated Reserves -14.37% -15.87% -19.56% -16.60% -16.60% -16.60% -16.60% -16.60% -16.60% -16.60%
Treasury Stock -16.39% -16.32% -12.72% -11.77% -10.79% -11.56% -12.02% -13.07% -14.97% -16.98%
Total Shareholders' Equity 55.73% 45.94% 51.48% 56.03% 57.37% 56.41% 55.35% 54.10% 54.41% 57.12%
Accumulated Minority Interest 14.04% 12.70% 10.41% 12.38% 12.38% 12.38% 12.38% 12.38% 12.38% 12.38%
Total Equity 69.77% 58.64% 61.88% 68.41% 69.76% 68.79% 67.73% 66.48% 66.80% 69.50%
Total Liabilities & Shareholders' Equity 169.66% 155.01% 156.44% 166.06% 159.64% 156.95% 154.29% 151.61% 151.17% 153.72%

Alcoa
Value Driver Estimation
Assumptions/other info:
Cost of debt 5.55%
2008 PV of Leases 304
WACC 0.10
NOPLAT
Revenue 23,682 23,058 23,906 25,101 26,607 28,470 30,747 33,207 34,868 35,739
COGS 20,484 19,286 19,136 19,994 21,088 22,473 24,176 26,014 27,219 27,443
Depreciation 1,380 1,348 1,289 1,323 1,355 1,402 1,460 1,523 1,588 1,656
SG&A Expense 997 1,008 995 1,045 1,011 1,068 1,107 1,162 1,220 1,251
R&D Expense 197 192 218 251 333 427 461 498 523 536
Plus Implied Interest on Operating Leases 55 52 42 42 43 44 44 43 43 42
EBITA 679 1,276 2,310 2,530 2,864 3,144 3,587 4,054 4,360 4,896
Provision for Tax Expense 162 428 320 587 664 741 855 983 1,066 1,222
Tax Shield on Interest Expense 203 191 153 180 180 187 208 222 233 240
Unusual Income (Expense) Tax (Shield) 16 865 377 4 4 4 5 5 5 5
Tax Shield on Operating Lease Interest 19 18 14 13 13 13 13 13 13 13
Change in Deferred Taxes (179) (606) (329) 500 500 500 500 500 254 0
Marginal Tax Rate 35% 35% 32% 32% 31% 31% 31% 31% 31% 31%
Adjusted Taxes 400 1,502 864 784 861 946 1,081 1,223 1,317 1,480
NOPLAT 900 2,172 2,845 2,247 2,504 2,698 3,006 3,330 3,297 3,416
Invested Capital Calculation
Operating Assets
Short-Term Receivables 1,739 1,818 2,128 2,234 2,368 2,534 2,737 2,956 3,104 3,181
Inventories 2,825 2,705 3,082 3,058 3,242 3,469 3,746 4,046 4,248 4,355
"Normal Cash" 474 461 478 502 532 569 615 664 697 715
Other Current Assets (Less: Derivatives Contracts)
Less: Operating Liabilities
1,275 1,009 1,182 1,156 1,226 1,311 1,416 1,530 1,606 1,646
Accounts Payable 2,702 2,960 3,152 2,924 3,099 3,316 3,581 3,868 4,061 4,163
Income Tax Payable 366 376 348 147 166 185 214 246 266 306
Other Current Liabilities 2,356 2,057 1,958 2,237 2,371 2,537 2,740 2,959 3,107 3,185
Operating Working Capital 889 600 1,412 1,644 1,732 1,846 1,980 2,123 2,221 2,244
Add: Net PPE 18,947 17,639 16,426 16,054 15,816 15,802 15,936 16,134 16,353 16,549
Add: Other Long Term Operating Assets 1,533 1,670 2,759 1,732 1,836 1,965 2,122 2,292 2,406 2,467
Net Intangibles (excluding goodwill) 407 399 0 758 715 672 629 586 543 500
PV of Operating Leases 938 762 718 760 778 790 790 784 774 764
Environmental Remediation 458 461 473 363 375 389 401 417 411 404
Deferred Revenue 108 101 93 116 113 110 108 107 107 108
Other 259 247 230 256 255 249 242 248 247 247
Total Invested Capital 21,889 20,261 20,519 20,213 20,134 20,325 20,705 21,146 21,532 21,765
ROIC 4.23% 9.92% 14.04% 10.95% 12.39% 13.40% 14.79% 16.09% 15.59% 15.86%
FCF 301 3,800 2,587 2,553 2,583 2,507 2,626 2,890 2,912 3,183
EP (1,203) 10 844 220 507 710 999 1,285 1,209 1,289

Alcoa
Weighted Average Cost of Capital (WACC) Estimation
Cost of Equity
Risk Free Rate 2.51%
Risk Premium 4.26%
Beta 1.61
Cost of Equity 13.41%
Cost of Debt
22-yr bond yield 5.55%
Tax Rate 30.50%
After Tax 3.86%
Weights
Total Equity 16,376,292,877.06
# shares 1,216,663,661.00
$/share 13.46
Total Debt 9,612,283,209.55
Total Value 25,988,576,086.61
Weight of Equity 63.01%
Weight of Debt 36.99%
WACC
9.88%

Alcoa
Discounted Cash Flow (DCF) and Economic Profit (EP) Valuation Models
Key Inputs:
CV Growth 2.50%
CV ROIC 15.86%
WACC 9.88%
Cost of Equity 0.13
Weight of Debt 36.99%
Weight of Equity 63.01%
After Tax Cost of Debt 3.86%
Operating Cash % of Sales 2%
Annual Dividend Yield 0.76%
DCF Model
FCF 2,553 2,583 2,507 2,626 2,890 2,912 3,183
CV 39,009
Periods to discount 1.00 2.00 3.00 4.00 5.00 6.00 6.00
WACC 10% 10% 10% 10% 10% 10% 10%
PV of CF 2,323 2,139 1,890 1,802 1,804 1,655 22,168
Sum of PV 33,781
Non-Operating Assets
Excess Cash 1,399
Total Investments and Advances 1,944
ESOP (186)
Less PV of OP Leases (708)
Less Short Term Debt (83)
Less Long Term Debt (8,769)
Less Provision for Risks and Charges (5,446)
Plus Minority Interest 2,488
Non-Operating Assets (9,362)
DCF 24,420
Shares Outstanding 1,217
Intrinsic Value per Share 20.07
W/ PY Adj. 20.81
EP Model 2015 2016 2017 2018 2019 2020 2021
EP 220 507 710 999 1,285 1,209 1,289
Periods to Discount 1.00 2.00 3.00 4.00 5.00 6.00 6.00
CV 17,477
PV of EP 201 420 535 685 803 687 9932
Sum of PV 13,263
Beg IC 20,519
VOA 33,781
Total Investments and Advances 1944
Excess Cash 1,399
ESOP (186)
Less PV of OP Leases (708)
Less Short Term Debt (83)
Less Long Term Debt (8,769)
Less Provision for Risks and Charges (5,446)
Plus Minority Interest 2,488
Non-Operating Assets (9,362)
DCF 24,420
Shares Outstanding 1,217
Intrinsic Value per Share 20.07
With Partial Year Adjustment 20.81
Today 4/21/2015
Next FYE 12/31/2015
Last FYE 12/31/2014
Days in FY 365
Days to FYE 254
Elapsed Fraction 0.696
Fraction of Fiscal Year Elapsed 0.304

Alcoa
Dividend Discount Model (DDM) or Fundamental P/E Valuation Model
EPS
1.05 1.25 1.41 1.65 1.94 2.16 2.55
Key Assumptions
CV growth 2.50%
CV ROE 10.67%
Cost of Equity 13.41%
Retention Ratio 86.70%
Future Cash Flows
P/E Multiple (CV Year) 10.87
EPS (CV Year) 2.55
Future Stock Price 13.01 14.75 16.73 18.98 21.52 24.41 27.68
Dividends Per Share 0.14 0.17 0.19 0.22 0.26 0.29 0.34
28.02
Periods to Discount 1.00 2.00 3.00 4.00 5.00 6.00 6.00
Discounted Cash Flows 0.12 0.13 0.13 0.13 0.14 0.14 13.17
Intrinsic Value 13.96
W/ Partial Year Adjustment 14.47
Share Count 1,093

Alcoa
Relative Valuation Models
EP EP Est. 5yr
Ticker Company Price 2015E 2016E P/E 15 P/E 16 EPS PEG
1
PEG
16CENX Century Aluminum Co. 14.12 2.40 2.60 5.88 5.43 7.00 0.84 0.78
KALU Kaiser Aluminum Corp 77.04 4.50 5.30 17.12 14.54 15.00 1.14 0.97
CCK Crown Holdings Inc. 54.16 3.50 3.90 15.47 13.89 8.30 1.86 1.67
CSTM Constellium 19.45 1.50 2.00 12.97 9.73 47.00 0.28 0.21
FCX Freeport-McMoran Inc. 18.97 1.20 2.40 15.81 7.90 36.30 0.44 0.22
Average 15.34 11.51 0.93 0.77
AA Alco
a
13.34 1.05 1.25 12.71 10.71 13.10 0.97 0.82
Implied Value:
Relative P/E PS15) 16.11
Relative P/E PS16) 14.34
PEG Ratio S15) 12.77
PEG Ratio
(
S16) 12.50

Alcoa
Key Management Ratios
Liquidity Ratios
Current Ratio 1.30 1.14 1.49 1.90 1.94 2.14 2.34 2.50 2.62 2.76
Quick Ratio 0.82 0.70 0.94 1.39 1.43 1.63 1.83 1.99 2.12 2.26
Activity or Asset-Management Ratios
Inventory Turnover 7.16 6.98 6.61 6.51 6.69 6.70 6.70 6.68 6.56 6.38
Receivable Turnover 8.74 8.58 7.87 7.61 7.63 7.66 7.68 7.68 7.61 7.55
Fixed Asset Turnover 1.23 1.26 1.40 1.55 1.67 1.80 1.94 2.07 2.15 2.17
Financial Leverage Ratios
Debt-to-Equity Ratio 1.43 1.64 1.53 1.40 1.20 1.15 1.11 1.07 1.04 0.99
Interest Coverage Ratio 1.17 2.32 4.88 4.43 4.86 5.12 5.27 5.56 5.71 6.23
Debt Ratio 0.59 0.62 0.60 0.58 0.55 0.54 0.53 0.52 0.51 0.50
Profitability Ratios
Profit Margin 13.50% 16.36% 19.95% 20.35% 20.74% 21.06% 21.37% 21.66% 21.94% 23.21%
Return on Assets 0.48% -6.39% 0.72% 3.19% 3.75% 3.99% 4.35% 4.71% 4.88% 5.36%
Return on Equity 1.16% -16.90% 1.81% 7.65% 8.26% 8.60% 9.16% 9.77% 9.95% 10.67%
Payout Policy Ratios
Dividend Payout Ratio 13.30% 13.30% 13.30% 13.30% 13.30% 13.30% 13.30%

CV Growth
20.81 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0%
Cost of Equity 10% $ 28.26 $ 29.39 $ 30.72 $ 32.30 $ 34.21 $ 36.58 $ 39.58 $ 43.51 $ 48.89
10.50% $ 26.62 $ 27.59 $ 28.73 $ 30.06 $ 31.66 $ 33.62 $ 36.05 $ 39.18 $ 43.33
11% $ 25.12 $ 25.96 $ 26.93 $ 28.06 $ 29.41 $ 31.03 $ 33.03 $ 35.54 $ 38.81
11.50% $ 23.74 $ 24.47 $ 25.30 $ 26.27 $ 27.41 $ 28.76 $ 30.41 $ 32.46 $ 35.05
12% $ 22.48 $ 23.10 $ 23.82 $ 24.65 $ 25.61 $ 26.75 $ 28.12 $ 29.80 $ 31.89
12.50% $ 21.30 $ 21.85 $ 22.46 $ 23.17 $ 23.99 $ 24.96 $ 26.10 $ 27.48 $ 29.19
13% $ 20.21 $ 20.69 $ 21.22 $ 21.83 $ 22.53 $ 23.34 $ 24.30 $ 25.45 $ 26.85
13.41% $ 19.38 $ 19.80 $ 20.27 $ 20.81 $ 21.43 $ 22.14 $ 22.97 $ 23.96 $ 25.15
13.50% $ 19.20 $ 19.61 $ 20.07 $ 20.60 $ 21.19 $ 21.89 $ 22.69 $ 23.65 $ 24.80
14% $ 18.26 $ 18.62 $ 19.01 $ 19.46 $ 19.98 $ 20.56 $ 21.25 $ 22.05 $ 23.00
14.50% $ 17.38 $ 17.69 $ 18.03 $ 18.42 $ 18.86 $ 19.36 $ 19.93 $ 20.60 $ 21.40
15% $ 16.56 $ 16.82 $ 17.12 $ 17.45 $ 17.83 $ 18.25 $ 18.74 $ 19.30 $ 19.96
15.50% $ 15.78 $ 16.01 $ 16.27 $ 16.55 $ 16.87 $ 17.24 $ 17.65 $ 18.12 $ 18.67
16% $ 15.06 $ 15.25 $ 15.47 $ 15.72 $ 15.99 $ 16.30 $ 16.65 $ 17.04 $ 17.50
Dividend Yield
20.81 0.25% 0.50% 0.76% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00%
Cost of Equity 10% $ 32.35 $ 32.32 $ 32.30 $ 31.44 $ 30.45 $ 29.38 $ 28.21 $ 26.92 $ 25.47
10.50% $ 30.10 $ 30.08 $ 30.06 $ 29.27 $ 28.35 $ 27.36 $ 26.28 $ 25.08 $ 23.74
11% $ 28.10 $ 28.08 $ 28.06 $ 27.33 $ 26.47 $ 25.55 $ 24.55 $ 23.44 $ 22.20
11.50% $ 26.31 $ 26.29 $ 26.27 $ 25.58 $ 24.79 $ 23.93 $ 23.00 $ 21.97 $ 20.81
12% $ 24.68 $ 24.66 $ 24.65 $ 24.00 $ 23.26 $ 22.46 $ 21.59 $ 20.63 $ 19.56
12.50% $ 23.20 $ 23.19 $ 23.17 $ 22.57 $ 21.88 $ 21.13 $ 20.32 $ 19.42 $ 18.42
13% $ 21.86 $ 21.84 $ 21.83 $ 21.27 $ 20.61 $ 19.91 $ 19.15 $ 18.31 $ 17.37
13.41% $ 20.84 $ 20.83 $ 20.81 $ 20.28 $ 19.66 $ 18.99 $ 18.27 $ 17.47 $ 16.59
13.50% $ 20.63 $ 20.61 $ 20.60 $ 20.07 $ 19.46 $ 18.80 $ 18.08 $ 17.30 $ 16.42
14% $ 19.49 $ 19.48 $ 19.46 $ 18.97 $ 18.39 $ 17.77 $ 17.10 $ 16.36 $ 15.54
14.50% $ 18.44 $ 18.43 $ 18.42 $ 17.95 $ 17.41 $ 16.83 $ 16.20 $ 15.50 $ 14.73
15% $ 17.48 $ 17.46 $ 17.45 $ 17.01 $ 16.50 $ 15.95 $ 15.36 $ 14.70 $ 13.97
15.50% $ 16.58 $ 16.57 $ 16.55 $ 16.14 $ 15.66 $ 15.14 $ 14.58 $ 13.96 $ 13.27
16% $ 15.74 $ 15.73 $ 15.72 $ 15.32 $ 14.87 $ 14.38 $ 13.85 $ 13.27 $ 12.62
Cost of Debt
20.81 1.50% 2% 2.50% 3% 3.50% 3.86% 4.00% 5% 5.00%
Cost of Equity 10% $ 40.33 $ 38.37 $ 36.56 $ 34.89 $ 33.34 $ 32.29 $ 31.90 $ 30.56 $ 29.30
10.50% $ 37.13 $ 35.42 $ 33.83 $ 32.36 $ 30.99 $ 30.06 $ 29.71 $ 28.50 $ 27.38
11% $ 34.34 $ 32.83 $ 31.43 $ 30.12 $ 28.89 $ 28.06 $ 27.74 $ 26.66 $ 25.65
11.50% $ 31.88 $ 30.54 $ 29.29 $ 28.12 $ 27.01 $ 26.26 $ 25.98 $ 25.00 $ 24.08
12% $ 29.69 $ 28.49 $ 27.37 $ 26.32 $ 25.32 $ 24.64 $ 24.38 $ 23.50 $ 22.66
12.50% $ 27.73 $ 26.66 $ 25.64 $ 24.69 $ 23.79 $ 23.17 $ 22.93 $ 22.12 $ 21.36
13% $ 25.97 $ 25.00 $ 24.08 $ 23.21 $ 22.39 $ 21.82 $ 21.61 $ 20.87 $ 20.16
13.41% $ 24.66 $ 23.76 $ 22.91 $ 22.10 $ 21.33 $ 20.81 $ 20.61 $ 19.91 $ 19.26
14% $ 22.93 $ 22.13 $ 21.36 $ 20.63 $ 19.94 $ 19.46 $ 19.28 $ 18.65 $ 18.05
14.50% $ 21.61 $ 20.87 $ 20.17 $ 19.50 $ 18.86 $ 18.42 $ 18.25 $ 17.67 $ 17.11
15% $ 20.40 $ 19.72 $ 19.07 $ 18.45 $ 17.86 $ 17.45 $ 17.29 $ 16.75 $ 16.23
15.50% $ 19.28 $ 18.66 $ 18.06 $ 17.48 $ 16.93 $ 16.55 $ 16.41 $ 15.90 $ 15.42
16% $ 18.25 $ 17.67 $ 17.12 $ 16.58 $ 16.07 $ 15.72 $ 15.58 $ 15.11 $ 14.66

2015 EPS
16.11 0.9 0.95 1 1.05 1.1 1.15 1.2 1.25
Avg 2015 P/E 12.5 11.25 11.88 12.50 13.13 13.75 14.38 15.00 15.63
13 11.70 12.35 13.00 13.65 14.30 14.95 15.60 16.25
13.5 12.15 12.83 13.50 14.18 14.85 15.53 16.20 16.88
14 12.60 13.30 14.00 14.70 15.40 16.10 16.80 17.50
14.5 13.05 13.78 14.50 15.23 15.95 16.68 17.40 18.13
15 13.50 14.25 15.00 15.75 16.50 17.25 18.00 18.75
15.34 13.81 14.57 15.34 16.11 16.87 17.64 18.41 19.18
16 14.40 15.20 16.00 16.80 17.60 18.40 19.20 20.00
16.5 14.85 15.68 16.50 17.33 18.15 18.98 19.80 20.63
17 15.30 16.15 17.00 17.85 18.70 19.55 20.40 21.25
17.5 15.75 16.63 17.50 18.38 19.25 20.13 21.00 21.88
18 16.20 17.10 18.00 18.90 19.80 20.70 21.60 22.50
18.5 16.65 17.58 18.50 19.43 20.35 21.28 22.20 23.13
19 17.10 18.05 19.00 19.95 20.90 21.85 22.80 23.75
19.5 17.55 18.53 19.50 20.48 21.45 22.43 23.40 24.38
20 18.00 19.00 20.00 21.00 22.00 23.00 24.00 25.00

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