Have Alcoa Inc Earnings Finally Turned the Corner?

The aluminum giant isn't a member of the Dow anymore, but the company still kicks off earnings season. Find out why investors are excited about Alcoa again.

Jan 7, 2014 at 2:03PM

Alcoa (NYSE:AA) will release its quarterly report on Thursday, and even though the company is no longer a member of the Dow Jones Industrials, it still has the reputation for starting off earnings season. For the first time in a long time, Alcoa has investors excited about its future prospects, even as it and fellow industry peers Aluminum Co. of China (NYSE:ACH) and Rio Tinto's (NYSE:RIO) Alcan subsidiary have continued to deal with challenges from a glut of supply and resulting low prices for the lightweight metal.

One peculiarity about the aluminum industry is that unlike almost every other sector of the economy, aluminum has never really recovered from the recession and market meltdown in 2008. Despite strong demand from certain corners, especially the aluminum-hungry aerospace industry, metal prices have languished, and that has held back Alcoa from gaining back anything more than a tiny fraction of its roughly 85% decline in share price during the financial crisis. Finally, though, the stock has started to press higher recently. Could that signal an end to the downturn in aluminum? Let's take an early look at what's been happening with Alcoa over the past quarter and what we're likely to see in its report.

Stats on Alcoa

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$5.40 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Will Alcoa earnings stay the course this quarter?
In recent months, analysts have been a bit more pessimistic about Alcoa's earnings prospects, cutting $0.02 per share from their earnings estimates for the full 2014 year. The stock has defied that pessimism, though, jumping 32% since early October.

Alcoa's third-quarter earnings report got the company off on the right foot, with the company reversing a year-earlier loss with a modest profit of $24 million for the quarter. In particular, investors were pleased with certain aspects of the company's guidance for 2014, with strong gains in China expected from the automotive and heavy truck and trailer segments. Anticipated gains in global aerospace demand of 9% to 10% should also help Alcoa and peers Chinalco and Rio Tinto Alcan in their efforts to keep prices up.

But the big news of the quarter came later in October, when Alcoa announced a joint venture with Russia's VSMPO-AVISMA, a producer of aircraft-grade titanium. The goal of the consortium will be to provide a one-stop shop for the titanium and aluminum demands of the aerospace industry, which expects trillions of dollars of new orders in the next 20 years. Given the reputation of both aluminum and titanium as being lightweight and durable, combining forces makes sense for both companies and should give Alcoa a competitive advantage over Rio Tinto Alcan and Chinalco in working with aerospace customers.

Moreover, Alcoa has plenty of opportunities to further its growth in the coming years. Big gains in car and truck sales in the U.S. have reinvigorated the auto industry, giving manufacturers more latitude to consider energy-saving engineering efforts that could boost the amount of aluminum used in new vehicle designs. Similarly, supply deals with Airbus and Boeing point to the need for high-quality aluminum production for mission-critical applications in aerospace and defense, while other uses in energy and electronics will also be critical to Alcoa's long-term success.

In the Alcoa earnings report, watch closely for further signs of overall economic recovery not just in the key China region but also in hard-hit areas like Europe, which has been taking steps toward coming out of recession recently. Shareholders are already anticipating better results for Alcoa, so the company will need to show signs of progress in order to avoid disappointing investors on Thursday.

The best recipe for long-term gains
If you want to get rich from the market, your best move is to come up with your best few ideas, bet big, and ride them to riches, hardly ever selling. That's why our CEO, legendary investor Tom Gardner, has permitted us to reveal "The Motley Fool's 3 Stocks to Own Forever." These picks are free today! Just click here now to uncover the three companies we love. 

Click here to add Alcoa to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers