On Monday, the traders pored over the latest results from Alcoa after the Dow component kicked off earnings season with a miss.
Shares of Alcoa, which were initially halted after market close, fell about 5 percent in extended trading.
What must you know about these results?
Alcoa: Nuts & Bolts
Alcoa reversed a loss from a year earlier, but still reported earnings that fell well short of Wall Street's estimates.
The aluminum giant said that it earned 1 cent a share compared with a loss of 28 cents a share in the fourth quarter of 2008.
Analysts who follow Alcoa expected it to report a profit of 6 cents a share, according to a consensus estimate compiled by Thomson Reuters.
Meanwhile, Alcoa said sales for the most recent quarter hit $5.43 billion, down from $5.688 billion last year.
Alcoa, a component of the Dow Jones Industrial Average, traditionally marks the unofficial start of earnings season. With a presence in diverse economies around the world, Alcoa is watched as a global economic bellwether.
Strategy Session with the Fast Money traders
I can’t get my arms around Alcoa valuations at 25 times forward earnings even if they grow revenues the way they expect to, says Guy Adami.
I’m bearish on aluminum because 45% of the input cost of producing the metal comes from energy and I think energy is going higher, adds Joe Terranova.
I didn’t think the Alcoa numbers were that bad, says Tim Seymour. If aluminum price can hold $1.10 I think Alcoa is a stock that could run.
Don’t forget the stock ran higher into the earnings report hitting a 52-week high on Monday, says Pete Najarian. And Alcoa is a serial disappointer. But with that said, if you want to play the space I like other metals such as copper much more.
With Alcoa stock dipping 5% in the after hours, I’d take a look at this stock, counters strategic investor Dennis Gartman. In a rising global economy I think investors should be owning metals. That's not to say Alcoa couldn't drop to $14 over the next two months but I think it could trade to $35 two years from now.
How are you trading the earnings season ahead? We want to know!
> Click here for complete CNBC’s complete coverage of Alcoa earnings
CHINA IMPORTS BOOM
On Monday, China goosed global growth names after Beijing said the nations’ imports surged 55.9%, much more than the 31% increase markets had expected.
What’s the trade?
I’m a seller of oil futures , says Joe Terranova. The news out of China should have been bullish for energy and yet action in oil was terrible.
If you want to be aggressive, adds Guy Adami, I think you can play crude oil short.
However, I’m long Frontier Oil as a long-term refiner trade, adds Terranova.
I’m a buyer of integrated names such as BP , Petrobas and Chevron , says Pete Najarian.
ANOTHER EARNINGS DUD: ERTS
Shares of Electronic Arts slipped in extended trader after the video game publisher slashed its fiscal 2010 outlook, citing weakness in Europe and shifting to lower margin products.
EA forecast on Monday earnings excluding items for the year ending March 31 of 40 cents to 55 cents a share on non-GAAP revenue of $4.125 billion to $4.2 billion.
It previously forecast earnings of 70 cents to $1 a share on revenue of $4.2 billion to $4.4 billion.
What’s the trade?
I can't help but wonder what ERTS results means for Best Buy , muses Guy Adami.
In the space I like Take-Two, says Pete Najarian. Options action suggests investors think it could be an acquistion target.
ARE BIG EARNINGS MOVES ALREADY PRICED IN?
The traders are gaming bank stocks after research from Bespoke shows financials are climbing while earnings revisions in the bank space remain flat.
What's the bank trade?
I’d play banks with a long position in Bank of America and short position in Comerica against it, counsels Joe Terranova. Also I’m short ICE on lower trading volumes.
I'm a buyer of Morgan Stanley, says Pete Najarian.
I’m long Bank of America, adds Tim Seymour and I’d also look at Barclays and HSBC.
I'm watching JPMorgan , says Guy Adami. I think the stock may be too rich at these levels.
CHARTOLOGY: EARNINGS SEASON CRYSTAL BALL
With Alcoa kicking off earnings season, we can’t think of a better time to consult the charts.
Which names are a ‘Buy” ahead of earnings and which names look like they’re about to break down?
We asked Oppenheimer chief market technician Carter Worth. Find out what he has to say about YUM, Western Union , AMD and SalesForce.com .
Watch the video now!
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Trader disclosure: On January 11th, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Seymour Owns (TM), (TTM), (AAPL), (BAC), (F), (INTC), (TSL); Najarian Owns (BP), Is Short (BP) Calls; Najarian Owns (CELG); Najarian Owns (FCX), Is Short (FCX) Calls; Najarian Owns (LDK); Najarian Owns (MS); Najarian Owns (PCX); Najarian Owns (PFE); Najarian Owns (SOLF) Call Spread; Najarian Owns (TEVA); Najarian Owns (TTWO) Call Spread; Terranova Is Short (AA) Jan. Put Spread, Is Long (AA) Feb. Put Spreads; Terranova Is Long Copper Backwardation Futures: Long May 2010, Short July 2010; Terranova Is Short Feb. Crude Oil Futures; Terranova Owns March British Pound Futures; Terranova Owns (XHB) March Puts; Terranova Owns (QCOM), (MSFT), (EMC), (FTO), (XOM), (BAC); Terranova Is Short (CMA), (JCI), (CAL), (ESS), (ICE), (SHLD)
GE Is The Parent Company Of CNBC
For Tim Seymour
Seygem Asset Management Is Short (PBR)
Seygem Asset Management Owns (CZZ)
For Joe Terranova
Terranova Works For (VRTS)
Terranova Is Chief Market Strategist Of Virtus Investment Partners, Ltd.
Virtus Investment Partners Owns More Than 1% Of (CLB)
Virtus Investment Partners Owns More Than 1% Of (DLR)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (UA)
Virtus Investment Partners Owns More Than 1% Of (XLB)
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Virtus Investment Partners Owns More Than 1% Of (SKT)
For Dennis Gartman
Funds Managed By Dennis Gartman Own Copper Futures
Funds Managed By Dennis Gartman Own (FCX)
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Cantor Fitzgerald & Co. Is A Market Maker In (JPM)
Cantor Fitzgerald & Co. Is A Market Maker In (USB)
Cantor Fitzgerald & Co. Is A Market Maker In (PNC)
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