Please ensure Javascript is enabled for purposes of website accessibility

Alcoa Leads Off With Surprising Strength

By David Smith – Updated Apr 6, 2017 at 12:37AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It wasn't Alcoa's best quarter ever, but it handily topped expectations.

And, they're off!

The first of the blue chips, Alcoa (NYSE:AA), reported Wednesday evening, and while its per-share results were better than expected, the company has a long way to go to recapture its prior sea legs.

The consensus expectation for the company had been a loss of about $0.38 a share, but earnings from continuing operations arrived at a loss of $0.32 per share. Further, backing out restructuring charges drops the number to a $0.26 loss, far better than the analysts who follow the company had anticipated. That net loss of $454 million would have compared to earnings of $546 million in the same quarter a year ago.

Looking at the company's segment results, Alumina fared the worst, losing $7 million compared to a prior quarter's gain of $35 million, but at least Primary Metals and Flat-Rolled Products both managed to cut their losses. And the fourth group, Engineered Products and Solutions, earned $88 million, down $7 million from the prior quarter.

On the conference call following the release, CEO Klaus Kleinfeld delivered what seemed to be a rather mixed outlook. On the one hand, he observed that weak demand for aluminum and falling metals prices might be abating somewhat. Indeed, aluminum prices are up 9% versus the prior quarter.

But at the same time, he attributed the lion's share of the improvement to import demand from China. In doing so, he noted that China's own aluminum industry will likely be strengthened by that nation's stimulus program, such that its demand for imports will likely slow going forward.

We'll learn more about the thin metal's current and future prospects when Century Aluminum (NASDAQ:CENX) and Kaiser Aluminum (NASDAQ:KALU) tell us about their quarters shortly. For its part, however, Alcoa's management is to be congratulated for positive results stemming from an array of cost-cutting efforts that have saved the company about $1 billion in procurement costs and in the vicinity of $270 million in overhead year to date.

On that basis, it'll also be informative to observe the cost-trimming effectiveness of other U.S.-based metals companies, including U.S. Steel (NYSE:X), Nucor (NYSE:NUE) and AK Steel (NYSE:AKS). All these companies have been laboring to slash overhead, and all will report during the next couple of weeks. In the meantime, Alcoa has set the bar pretty high.  

For related Foolishness:

Fool contributor David Lee Smith doesn't own shares in any of the companies mentioned above. He does, however, welcome your questions and comments. The Fool has an ironclad disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Alcoa Inc. Stock Quote
Alcoa Inc.
AA
Nucor Corporation Stock Quote
Nucor Corporation
NUE
$105.87 (-2.74%) $-2.98
United States Steel Corporation Stock Quote
United States Steel Corporation
X
$18.59 (-5.54%) $-1.09
AK Steel Holding Corporation Stock Quote
AK Steel Holding Corporation
AKS
Kaiser Aluminum Corporation Stock Quote
Kaiser Aluminum Corporation
KALU
$63.30 (-4.47%) $-2.96
Century Aluminum Company Stock Quote
Century Aluminum Company
CENX
$5.95 (-6.15%) $0.39

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.