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Alcoa Downgraded to ‘Junk’ Status

Alcoa (NYSE: AA) used to be the bellwether for earnings season. The media might still hype it up as important but in reality, Alcoa is a shell of what it once was. On Wednesday, Moody’s Investors Service downgraded Alcoa’s credit rating to junk status citing lower aluminum prices.

Moody’s may have given the company credit for reducing costs and increasing efficiency but the report cites difficult industry trends will make it difficult for the company to maintain an investment grade rating in 2013 or 2014.

Specifically, analyst Carol Cowan lowered her rating from ‘Baa3’ to ‘Ba1’–the highest junk status rating. (‘Baa3’ is the lowest investment grade status.)

Moody’s notes that Alcoa has $8.6 million in debt and its outlook on Alcoa is stable.

The company said that it’s disappointed with the downgrade but it won’t affect its business strategy. The ratings downgrade, in the company’s opinion, represents difficult macroeconomic conditions and volatile metal prices–not Alcoa’s operating or financial position.

In April, the company reported lower-than-expected first quarter revenue and Alcoa announced that it will shut down two production facilities at one of its Canada plants.

In after-hours trading, Alcoa was down $0.12 or 1.40 percent at $8.46.

Disclosure: At the time of this writing, Tim Parker had no position in Alcoa.

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