"I am not convinced that the stock will grow in value for quite a long time. I have not read many positive reports on global economic growth for 2013 and this does not sit well for Alcoa going into a new year. But, the company is presently laying a good foundation for global growth."
The company was trading at 8.74 at the time - it dipped but then gaped up and has continued to move and is presently trading at 9.15. It has increased in value by about 4.7%. It could possibly increase this year early because of its numbers.
Last night Alcoa came out with its numbers and the numbers look good:
- Revenue for the quarter came in at $5.9 billion, up 1 percent sequentially, down 2 percent from last year and versus the consensus estimate of $5.6 billion.
- Sequentially, the higher fourth quarter revenues were primarily due to improved realized pricing for aluminum (up 5 percent).
- Alcoa reported earnings in the quarter of $0.21 per share, or $0.06 ex-positive items, which was in-line with the analyst estimate of $0.06.
2013 Growth Alcoa Expects:
- Global aluminum demand growth of 7 percent, up from 6 percent in 2012
- Aerospace (9-10 percent)
- Automotive (1-4 percent)
- Commercial Transportation (2-7 percent)
- Packaging (2-3 percent)
- Building and Construction (4-5 percent)
- Industrial Gas Turbine (3-5 percent)
Since it reported its fourth quarter numbers first and it is aluminum, analysts and investors like to scrutinize its numbers to predict where the economy is going. Aluminum is widely used in a number of industries, including automotive, aerospace and appliances. With 2013 coming around, aluminum is forecasted to grow at 7% (1% higher than 2012). This good news for global economic growth was supported by Alcoa's fourth quarter numbers (as previously mentioned) but I believe the real boost for the market was Alcoa's revenue surpassing market expectations.
Putting Alcoa's Numbers in Perspective
Alcoa has an influence on global manufacturing and in terms of the United States' GNP, it amounts to about 15% and Alcoa's influence in this sector is not major. The company did reach estimates of $0.06 ((EPS)) but there may be more to interpret than the numbers. It was just back in October that estimates were set at $0.08. Is meeting estimates of recently trimmed earnings numbers (of 25%) good news? We are still in a lagging global economy and it is important to not lose investing perspective on this.
So I would recommend caution. It is early in the earnings season and I believe it is important not to lose perspective on the overall picture. Let us not forget that even though earnings are expected to be up by 0.5% this quarter from a year ago, in late September the forecast was growth of 7.5%. Has the bar been set so low that many companies will exceed expectations? Are we in a season of under-forecast then over-deliver? If companies continue to beat dismal expectations there is not much to get excited about. Third quarter earnings growth was expected to be down (3%) but came in better at (-0.1%) and I do not believe we will see much growth this quarter. It may be toward year's end before we see any growth so as I said before: I would still recommend cautious investing.
Alcoa has been on a bullish journey since mid November. It did rest a bit toward the end of December but started off the New Year with a gap up like the rest of the market, with news about the fiscal cliff issue being solved. The recent move up touched a resistance point that the stock has since been challenging but has yet to push through. On the last two tops, the RSI indicator still has room to move up before it gets into overbought conditions. The MACD has continued to move up and still looks like it is climbing. I am watching the stock also hang on to the upper Bollinger Band, but the stock will need to slow down a bit and it is at the perfect point to do that.