Alcoa Inc (NYSE:AA) will "officially" start the first quarter earnings season when they hold a conference call on Tuesday, April 8 beginning at 5:00 p.m. EDT to discuss first quarter 2014 results and business developments. The conference call will be webcast live via Alcoa's website, with presentation materials available online.
Wall Street anticipates that the aluminum maker will earn $0.05 per share for the quarter, which is $0.06 less than last year's profit of $0.11 per share. iStock expects AA to top Wall Street's consensus number. The iEstimate is $0.06, a bullish surprise of a penny.
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Sales, like earnings, are expected to fall, slipping 4.2% year-over-year. Alcoa's consensus revenue estimate for Q1 is $5.59 billion, down from last year's $5.83 billion.
Alcoa is engaged in lightweight metals, products and solutions. The Company offers its technology and expertise in automotive and aerospace transportation, building and construction, consumer electronics and packaging, defense applications across air, land and sea, and the oil and gas industry. The Company is also a producer of primary aluminum, as well as a miner of bauxite and refiner of alumina. The Company's segments include Alumina, Primary Metals, Global Rolled Products and Engineered Products and Solutions.
In what is usually a bullish sign for the upcoming quarterly review, six analysts raised their outlooks for Q1 in the last month and three of them in the last week.
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AA business is dependent on airplanes, and automobiles; cars in particular have rebounded after the thaw from the polar vortex. Construction is another beneficiary of better weather. Perhaps, that's why a half-dozen analysts lifted their views recently.
Aluminum's price is another getting a price hike, at least lately. After a yearlong decline, the metal is at a 2014 high on concerns there isn't enough aluminum to meet demand. For the first time in a while, aluminum's price is above its 200-day moving average, which is considered bullish long-term.
Analyst, Bart Melek of TD Securities in Toronto told Bloomberg, "The supply situation is definitely pushing prices higher." But the recent spike is more of a benefit for the second quarter than the first, in our opinion; although the price climb did start late in Q1, which is probably why analysts are more optimistic lately.
When dealing with refinishing commodities, costs are the key to margins. Keeping expenses in-line with sales increases/decreases tend to make the difference between good and bad quarters.
In 2013, total costs rose 6.3% while revenue slipped 2.82%. Wall Street will be interested in hearing how Alcoa management plans of reversing that trend in 2014. While the income statement tells of necessary cost cutting, the balance sheet looks better as management is controlling inventory and clients appear to be paying on-time, which is usually a sign of a healthy market.
Overall: The iEstimate suggests a small bullish surprise for Alcoa Inc (NYSE:AA), but we expect guidance to play a bigger role than earnings Tuesday afternoon. With demand outstripping supply, making prices rise, if management can reduce costs, AA's outlook could prove positive.
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