Alcoa Inc. (NYSE:AA)
Materials - Metals & Mining | Reports April 11, After Market Close
Key Takeaways:
- The Estimize consensus is more bullish than Wall Street on Alcoa, calling for EPS of $0.04 and revenue of $5.29 billion.
- The company is facing slowdowns in construction, building, and commercial transportation markets
- Alcoa has suffered from a slowdown in China combined with weak aluminum pricing
Alcoa, Inc., the global leader in lightweight metals technology, is prepared to kick off earnings season, as it typically does, with first quarter earnings this Monday. Alcoa is coming off a better than expected fourth quarter, beating on the bottom line by 2 cents and $25 million on the top.
Unfortunately, Alcoa is still seeing unfavorable YoY comparisons which is expected to continue through fiscal 2016. This quarter, EPS is projected to decline 85% compared to the same period last year while sales are looking to fall 9%. As a result, the Estimize consensus is calling for EPS of $0.04 on $5.29 billion in revenue, 2 cents higher than Wall Street on the bottom line. Ahead of its earnings report, per share estimates have been cut 44% while sales are up 6%.
Alcoa primarily deals with the production of aluminum and alumina metals. Unfortunately, aluminum has suffered from oversupply and weakness in China. As a result, the metal has reached a six year low and put pressure on corporate earnings. Alcoa has continue to struggle from a slowdown in its non residential building and construction divisions in Europe, Canada and the United States.
On the bright side, Alcoa is implementing new cost cutting initiatives and streamlining assets in order to boost margins. Earlier this year, Alcoa announced plans to split into two publicly traded companies. One will handle the portfolio of downstream assets and the other will maintain the commodities business. The split is expected to relieve pressure on margins and improve productivity.
While the Chinese economy is hurting, Alcoa’s aerospace division has been a rare bright spot. Alcoa is expecting a bump in aircraft orders in 2016 and should hopefully eclipse the $9 billion recorded in aerospace contracts from this past year. 
Do you think AA can beat estimates?