3 Things to Watch When Alcoa Releases Earnings

3 Things to Watch When Alcoa Releases Earnings

Alcoa (NYSE: AA)

• Alcoa is expected to report earnings of $0.12 per share, up from $0.07 per share in last year’s second quarter.

• Revenue, however, is expected to drop 3.3% year-over-year to $5.66 billion.

Scheduled to report first quarter results July 8th after markets close.

Photo credit: Alcoa

So far, Alcoa is off to a great start in 2014. The company handedly beat earnings estimates last quarter.

Photo credit: Alcoa

Because of that Alcoa’s stock has taken off this year.

That positive momentum can be continued if the

company succeeds in the following three areas…

1. Look to see if Alcoa can at least meets earnings estimates:

Last quarter Alcoa earned $0.09 per share, which was 80% higher than analysts were expecting.

This quarter analysts expect the company to earn about $0.12 per share, though the range is anywhere from $0.09 per share to $0.16 per share.

In order to maintain its positive momentum the company needs to at least meet the average consensus estimate.

2. Keep an eye to ensure that Alcoa can deliver continued growth in its value-add segments:

Recently announced the acquisition of Firth Rixson to strengthen its aerospace offering.

Alcoa has announced a number of investments in value-add businesses like automotive, packaging and aerospace, while reducing its lower margin smelting capacity.

Look for additional announcements as Alcoa’s portfolio transformation continues.

2. Keep an eye to ensure that Alcoa can deliver continued growth in its value-add segments:

Recently announced the acquisition of Firth Rixson to strengthen its aerospace offering.

Alcoa has announced a number of investments in value-add businesses like automotive, packaging and aerospace, while reducing its lower margin smelting capacity.

Look for additional announcements as Alcoa’s portfolio transformation continues.

Source: Alcoa Investor Presentation

3. Watch for any other big changes on the balance sheet:

As of last quarter Alcoa had $655 million of cash on hand and its net debt-to capital ratio was 33%.

However, the acquisition of Firth Rixson includes $2.35 million in cash, which is being funded by added debt.

Company remains committed to an investment grade credit rating.

Any weakness in its value-add segment could have an impact on its credit metrics.

Alcoa’s transition from a commodity focused company to one profiting from adding value to that commodity is going well. As long as that transition

continues, the company’s stock should keep rewarding investors.

Photo credit: Alcoa

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