Critical Review: Alcoa (AA) and Mueller Industries (MLI)

Alcoa (NYSE: AA) and Mueller Industries (NYSE:MLI) are both industrial products companies, but which is the better stock? We will compare the two companies based on the strength of their profitability, institutional ownership, valuation, earnings, dividends, analyst recommendations and risk.

Volatility & Risk

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Alcoa has a beta of 0.1, suggesting that its stock price is 90% less volatile than the S&P 500. Comparatively, Mueller Industries has a beta of 1.42, suggesting that its stock price is 42% more volatile than the S&P 500.

Earnings & Valuation

This table compares Alcoa and Mueller Industries’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Alcoa $11.65 billion 0.71 $217.00 million $1.15 38.88
Mueller Industries $2.27 billion 0.65 $85.59 million $1.49 17.25

Alcoa has higher revenue and earnings than Mueller Industries. Mueller Industries is trading at a lower price-to-earnings ratio than Alcoa, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of current recommendations and price targets for Alcoa and Mueller Industries, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Alcoa 0 4 10 0 2.71
Mueller Industries 0 0 0 0 N/A

Alcoa presently has a consensus price target of $58.46, suggesting a potential upside of 30.76%. Given Alcoa’s higher probable upside, research analysts clearly believe Alcoa is more favorable than Mueller Industries.

Profitability

This table compares Alcoa and Mueller Industries’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Alcoa 1.86% 7.20% 3.28%
Mueller Industries 3.78% 16.47% 6.62%

Insider & Institutional Ownership

93.4% of Mueller Industries shares are held by institutional investors. 2.8% of Mueller Industries shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Dividends

Mueller Industries pays an annual dividend of $0.40 per share and has a dividend yield of 1.6%. Alcoa does not pay a dividend. Mueller Industries pays out 26.8% of its earnings in the form of a dividend. Alcoa has raised its dividend for 6 consecutive years.

About Alcoa

Alcoa Corporation, formerly Alcoa Upstream Corporation, is engaged in the production of bauxite, alumina and aluminum of various cast and rolled products. The Company is engaged in the production and management of aluminum and alumina combined through its participation in various aspects of the industry, such as technology, mining, refining, smelting, and recycling. The Company’s segments include Bauxite, Alumina, Aluminum, Cast Products, Energy and Rolled Products. The Company’s Bauxite segment represents its global portfolio of bauxite mining assets. The Company’s Alumina segment represents its refining system across the world, and processes bauxite into alumina and sells it directly to internal and external smelter customers across the world. The Company’s Aluminum segment represents its smelter system across the world. Its Energy segment represents its portfolio of energy assets, with power production capacity of approximately 1,685 megawatts.

About Mueller Industries

Mueller Industries, Inc. is a manufacturer of copper, brass, aluminum and plastic products. The Company operates through three segments: Piping Systems, Industrial Metals and Climate. The Company’s products include copper tube and fittings; line sets; brass and copper alloy rod, bar, and shapes; aluminum and brass forgings; aluminum impact extrusions; plastic fittings and valves; refrigeration valves and fittings; fabricated tubular products, and steel nipples. The Company also resells imported brass and plastic plumbing valves, malleable iron fittings, faucets, and plumbing specialty products. The Company’s operations are located throughout the United States and in Canada, Mexico, Great Britain, South Korea, and China. The Company markets its products to the heating, ventilation, and air-conditioning (HVAC), plumbing, refrigeration, hardware, and other industries.

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