Alcoa Stiff Arms Earnings Impact And Shows Confidence Into 2014

Jan. 19, 2014 12:40 AM ETAlcoa Corporation (AA)10 Comments
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Quoth the Raven

In the last few days I have written several articles looking at Alcoa (NYSE:AA) as it heads into 2014. My first article was earlier this year and I stated my case for opening a starter position in the company ahead of its earnings. Then, on January 10, I wrote a second article explaining why I was adding to my position on the earnings dip.

It was a rocky day two weeks ago when Alcoa reported. The announcement was overshadowed by an early-morning disclosure of an SEC settlement. Alcoa posted earnings after the bell on Thursday two weeks ago. They announced an EPS of $0.04 excluding items, off of analyst estimates of $0.06/share. Revenue beat, coming in at $5.59 billion vs. $5.34 billion in estimates. Year over year, however, revenue was still off from $5.90 billion.

As analysts go back through Alcoa's earnings, they are starting to find out that there were some signs of promise underneath the surface. The company's cash flow continues to increase, its year-over-year EPS estimate has grown sequentially, and worldwide aluminum demand is showing an inkling of potentially beating estimates.

Alcoa traded up 12% in the week following the company's earnings, so the outlook on the company has clearly shifted to "forward thinking". You can see the earnings miss hit on the 10th, followed by a parabolic looking run up to close the week at $11.36.

In the last week, Alcoa declared its dividend - yielding a pedestrian 1% annually - of $0.03/share. It was also announced subsequent to my last article that the company was cutting smelting capacity. SA contributor Trefis pointed out:

Alcoa's has announced that it is permanently closing down the remaining two potlines at its Massena East aluminum smelter in New York because they are not competitive anymore. This facility has three

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