Preview: Alcoa Gets Earnings Season Going
One of the largest aluminum companies in the world. Does everything from mining bauxite to refining aluminum to selling products made from the metal for use in cars, planes and, of course, beer and soda cans.
Reports Q1 earnings Monday 4/7 at approx. 415p. Conference call at 5p.
WHAT WILL MOVE THE STOCK:
ALUMINUM PRICES - Alcoa shares have gotten a boost from recent increases in commodity prices. What's the outlook?
DEMAND - What does Alcoa say about demand for its products both domestically and overseas? What about different product categories (aerospace, automotive etc.)?
OIL PRICES - Aluminum production is very energy intensive, so changes in oil prices can have a big impact on Alcoa's bottom line. Higher fuel prices also impact demand for products that use aluminum. How are energy costs impacting Alcoa's bottom line? Does Alcoa see changes in sales due to rising oil prices?
OPTIONS ACTION - On Thursday, traders noted heavy trading in Alcoa calls. A couple different news sources attributed the trading to takeover rumors. Speaking of which...
M&A BUZZ - The end of Companhia Vale do Rio Dolce's takeover attempt of Xstrata isn't necessarily the end of consolidation in the mining and metals sector. Citi says Alcoa and Freeport-McMoRan are the next two most "accessible" targets.
IS THE SMART MONEY ON AN EARNINGS BEAT? - Starmine.com keeps tabs on how accurate Wall Street analysts' estimates are then builds its own earnings forecast by giving higher weighting to the people with the best track record. Starmine's SmartEstimate for Alcoa is 51 cents per share in Q1 -- an unusually large three cents above Thomson's consensus. In Q2, the difference is even more pronounced: Starmine's EPS forecast is 89 cents per share, a full 16 cents or 21% above Thomson's estimate. Are the "better" analysts on to something?
Q1 Estimates: EPS down 40% to $0.48, revenues down 9% to $7.182 billion
Q2 Estimates: EPS down 10% to $0.73, revenues down 15% to $6.880 billion
FY 08 Estimates: EPS up 12% to $2.90, revenues down 6% to $28.821 billion
Source: Thomson Financial
Year-ago actuals: Q1 EPS $0.79, Rev. $7.908 billion
*All estimates are current as of 4/4 and subject to change.*
WHAT'S SO OFFICIAL ABOUT IT? - Why does CNBC say Alcoa's earnings report marks the "official" beginning of earnings season? Does CNBC have an unhealthy love of Pittsburgh-based aluminum giants? Sorry, no conspiracy here. To begin with, Alcoa is the first of the Dow Industrials component firms to release earnings each quarter. Perhaps more important: it is traditionally the first major company to report results for the most recent calendar quarter (in this case, the first quarter of 2008). So far we have gotten Q1 earnings from 26 S&P 500 companies, but all of them (Bear Stearns, Lehman etc.) have fiscal quarters that ended more than a month ago.
#1 IN THE DOW - Since Alcoa last reported earnings on Jan. 9, the company's shares are up about 24%, making it the strongest performer in the Dow 30. Over the same period, the Industrials index is down 1.9%.