Shares of aluminum giant Alcoa Corp (NYSE:AA) jumped sharply after the company reported earnings, rising to close the day up 9.4% Tuesday.
Alcoa reported its fiscal Q1 2017 earnings results after the close of trading on Monday, meaning Tuesday was the first chance investors got to react to its numbers. Luckily for Alcoa, they liked those numbers -- a lot. Alcoa reported earnings of $1.21 per diluted share on revenue of $2.7 billion. The profit was a nice change from Alcoa's big loss one year ago, and the company's revenue shot up 25% in comparison to the year-ago quarter.
Expectations-wise, Alcoa's earnings beat analyst expectations by at least $0.10. The company's revenue, however, fell somewhat short of Wall Street's hoped-for $3 billion in sales.
Alcoa did not provide much in the way of guidance for the year ahead in its earnings release, noting only that it "is projecting 2017 global aluminum demand growth of 4.5 to 5 percent over 2016." Assuming that translates into 4.5% to 5% gains in sales for Alcoa, however, the sharp year-over-year rise in sales that we saw in Q1 could quickly slow as this year progresses. Working off that assumption, sales in 2017 could top out at about $9.8 billion (5% above 2016 levels).
A rosier scenario for Alcoa, though, might look like this: Global demand for aluminum rises 5%, and the rising prices that Alcoa saw for alumina and aluminum in Q1 2017 continue to rise as well. That would be a recipe for even greater revenue for Alcoa, and even enable the company to turn last year's net loss into a profitable 2017.
Given the price spike Alcoa stock is enjoying right now, I'd say that's the scenario that investors are betting on happening.