Earnings season kicked off Tuesday after the U.S. stock markets closed for the day. The opening act, as always, was Pennsylvania-based aluminum giant Alcoa (NYSE:AA). Unfortunately, the pride of the Keystone State lost $178 million in the first three months of '14, but some surprising upside had investors pushing the stock up over 2.5% in after-hours trading Tuesday.
Get ready to get disappointed. Investors overall are expecting earnings from the beginning of this year to be down compared with last year's first quarter. Because of the brutal cold weather and lack of economic mojo for 2014 so far, it could be just the second quarter of falling profits since America's economic recovery began in late 2009.
Investors are focusing on Alcoa's "blue steel." The main drivers of the loss were restructuring costs related to plant closures. It actually costs a lot of money to lay off workers and shutter factories, but the short-term pain was necessary to reduce output. There's been such oversupply of aluminum (Alcoa's main product) recently that prices are falling like an aluminum PBR can post-shotgun chug. Cutting production is necessary to stabilize prices.
Why's the stock climbing? Wall Street likes to "clean" financial results by removing the non-recurring events. If you ignore the restructuring costs related to the downsizing, Alcoa's core business was actually pretty darn good. These "adjusted" earnings were $98 million -- double what Wall Street expected. More and more cars are being made with aluminum these days (yup, the Ford F-150 is the same material as afore-shot-gunned PBR can), and Alcoa is profiting handsomely on the market trend.
Go hug the owner of your neighborhood bodega, because he's feeling better about the economy. According to the National Federation of Independent Business' small business optimism index, confidence among small-biz owners rose more than expected in March -- up 2 points to reach 93.4 on the research firm's special scale.
In the detes, the index is based on a monthly survey of all the small-business members of the NFIB on 10 key issues, including expansion plans, job openings, and simply how they feel about the overall U.S. economy. For the March report, six of those 10 were up for mom-'n'-pop shops, led by future sales and inventory expectations (hopefully that inventory stat is relevant for our local cupcake shop).
The takeaway is that February wasn't fun for anyone without a North Face jacket in the frigid United States. Consumers deterred by the weather didn't just slow their shopping patterns at big-box retailers, as those large public companies have disclosed in their recent earnings reports, but also in small businesses nationwide. The positive March numbers came on the heals of the huge 2.7-point drop on the index in February, so investors were pumped about the quick rebound.
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Jack Kramer and Nick Martell have no position in any stocks mentioned. The Motley Fool recommends Bed Bath & Beyond and Ford and owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.