Is There Still a Trade in Aluminum?

by: Benzinga

By Gary Cassady

Alcoa (NYSE:AA) kicked off earnings season yesterday by reporting its Q4 results. EPS was $0.21 while sales came in light at $5.65 billion (estimates were $5.71 billion). Alcoa said on its conference call that higher energy and raw material costs, as well as a weaker dollar, contributed to the dismal results.

I expect other aluminum manufacturing companies such as Century Aluminum (NASDAQ:CENX), Kaiser Aluminum (NASDAQ:KALU) and Alumina Limited (AWC) to have similar results, as the industry as a whole felt the weaker dollar and higher input costs. There's no way to get around those externalities. Guidance will be key for these companies as the economy looks to turn around in 2011. Look for aluminum demand to pick up as manufacturing increases, as does the production of automobiles.

Would I be a buyer of any of the aluminum companies ahead of earnings? Probably not, but the industry weakness could potentially be a buying opportunity as the manufacturing industry continues to turn around.

AA is trading lower at $16.22.

CENX is trading at $16.55.

AWC is trading 3 % lower at $9.66.

KALU is trading higher at $48.84.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.