), shares of which have surged about eight percent in the past
week, is scheduled to report its fourth-quarter 2012 results
Tuesday, January 8, after the markets close. Investors will be
looking to see how much the sluggish global economy, particularly
in China and in Europe, will drag on earnings. Moody's recently
warned that it might downgrade Alcoa, in part due to its debt
Analysts on average predict that Alcoa will report revenue for
the quarter that fell more than six percent year-over-year to $5.61
billion. Per-share earnings are expected to come to $0.06, compared
to a net loss of $0.03 per share in the same quarter of last year.
That consensus earnings estimate has slipped in the past 60 days
from $0.08 per share. Alcoa has not fallen short of earnings
expectations in the past four quarters. The third quarter adjusted
profit of $0.03 surprised analysts, who had expected Alcoa to break
Alcoa attributed the third quarter results to stronger demand
for aluminum products from airplane and automobile producers. But
it also posted charges for settlements with the Environmental
Protection Agency and a joint venture partner in Bahrain, and it
lowered its aluminum demand expectations for the fourth quarter,
largely due to China's economic slowdown. The share price pulled
back almost five percent in the week following the third-quarter
The analysts' consensus full-year forecast calls $0.24 per share
earnings on revenue of $23.36 billion. That compares to $0.72 per
share and $24.95 billion in the previous year. That consensus EPS
estimate has declined in the past 60 days from $0.26.
Alcoa is the world's third largest producer of aluminum. The
company operates in four segments: Alumina, Primary Metals,
Flat-Rolled Products, and Engineered Products and Solutions. This
S&P 500 and Dow Jones Industrial Average component has a market
capitalization near $9.9 billion and its operational headquarters
are in Pittsburgh. Klaus Kleinfeld has been the chief executive
since May 2008.
Alcoa's two larger competitors are privately held Rio Tinto
Alcan and RUSAL. It also competes with Aluminum Corporation of
). The latter is expected to report net losses for the fourth
quarter and the full year.
During the three months that ended in December, Alcoa sent its
first shipment of alumina to a new joint venture-run facility in
Saudi Arabia, completed the sale of a hydroelectric project located
in Tennessee and opened an aluminum wheel facility in China.
Alcoa's long-term EPS growth forecast is more than 10 percent,
and the forward earnings multiple is less than the industry average
price-to-earnings (P/E) ratio. The operating margin is greater than
the industry average, but the return on equity is in negative
territory. The number of shares sold short is more than six percent
of the float, the highest it has been since the end of October.
Only six of the 19 analysts surveyed by Thomson/First Call who
follow the stock recommend buying shares; 10 of them recommend
holding shares. However, the analysts believe the stock has some
room to run as their mean price target represents almost 11 percent
potential upside. But that target price is less than the 52-week
high from early last year.
Shares flirted with the 52-week low in mid-November, but they
have risen about 15 percent since then. As previously mentioned,
the share price jumped about eight percent in the past week. It
crossed above the 200-day moving average for the first time since
September. Over the past six months, the stock has underperformed
Aluminum Corp. of China, but its performance has been in line with
Bullish: Investors interested in exchange traded funds invested
in Alcoa might want to consider the following trades:
iShares Dow Jones U.S. Basic Materials (NYSE:
) is almost nine percent higher than a month ago. Materials Select
Sector SPDR (NYSE:
) is about eight percent higher than a month ago. Vanguard
Materials ETF (NYSE:
) is about seven percent higher than a month ago.
Bearish: Traders may prefer to consider these alternative
positions in the same sector:
Alpha Natural Resources (NYSE:
) is up more than 29 percent in the past month. Cliffs Natural
) is up more than 28 percent in the past month. Companhia
Siderurgica Nacional (NYSE:
) is up more than 20 percent in the past month. Vale (NYSE:
) is up almost 18 percent in the past month.
(c) 2013 Benzinga.com. Benzinga does not provide investment advice.
All rights reserved.
Gain access to more investing ideas, tools & education.
Get Started on Marketfy, the first ever curated
& verified Marketplace for everything trading.