These 2 Earnings Reports Hold the Secret to the Stock Market's Future

Thursday brought fresh new highs for most of the stock market, as the Dow Jones Industrial Average (^DJI 0.67%) and S&P 500 (^GSPC 0.87%) hit records and the Nasdaq Composite (^IXIC 1.11%) fell just shy of new all-time highs. Investors were excited about signs of a strong economic recovery as more of the U.S. emerges from the worst of the COVID-19 pandemic.

Data source: Yahoo! Finance.

Earnings season is getting into high gear, and investors heard the latest from two key companies in the industrial sector. Delta Air Lines (DAL 3.05%) started things off Thursday morning with the latest on how the airline industry is faring amid tough conditions, while after the closing bell, aluminum specialist Alcoa (AA 2.31%) weighed in with its latest results.

Losing a little altitude

Shares of Delta Air Lines finished lower by about 3% Thursday. The airline giant's first-quarter financial numbers were predictably ugly, and shareholders didn't seem to take as much solace from the prospects of improving conditions as many had hoped.

Revenue for 2021's first quarter was down 65% from pre-pandemic levels in 2019 and was off by more than half from the first quarter of 2020. Delta lost $2.9 billion on an adjusted pre-tax basis, excluding $1.2 billion received from the first extension of the federal government's payroll support program. Cash burn averaged $11 million per day during the period.

Image source: Delta Air Lines.

However, Delta saw some upbeat results later in the period. During March, cash flow went positive and passenger revenue improved by 50% compared to February levels. Moreover, CEO Ed Bastian is optimistic that the second quarter will see further improvement, especially as Delta anticipates taking away the current blocking of middle seating at the beginning of May.

Nevertheless, investors shouldn't assume things will get back to normal any time soon. Second-quarter projections still include anticipated revenue declines of 50% to 55% from its level two years ago, with massive reductions in scheduled capacity. As good a job as Delta has done, the magnitude of the disruptions to the airline industry has been huge, and it'll take time for things to get closer to normal.

Looking shiny

Shares of Alcoa were down about 2% in the regular trading session. However, they moved higher by more than 3% after hours, following Alcoa's release of first-quarter financials.

Alcoa saw what it called its best quarterly results since 2018, with strong execution despite the challenges of the COVID-19 pandemic. Revenue rose 20% and net income more than doubled from year-ago levels. Shipments of raw alumina material were up 7%, while refined aluminum shipments climbed 13% year over year.

Alcoa celebrated its continuing strategy to concentrate on its best prospects. It completed its sale of a metal rolling mill to Kaiser Aluminum at the end of March, raising valuable cash and retaining an interest in the nearby smelter facility. Alcoa will maintain a supply relationship with Kaiser going forward, ensuring future flows of raw materials.

Alcoa expects 2021 to be a good year, and investors have high hopes for favorable tailwinds from infrastructure spending and other economic support. The stock has already rebounded considerably from a year ago, but there's plenty more room for Alcoa to regain its former heights if the economy heats up from here.

Delta and Alcoa are both key indicators of economic strength across the business world. If they can perform well, then it could help keep the stock market climbing. If they lose ground, it could signal an end to the bull run we've seen lately.