After the market closes on Tuesday, Alcoa Inc. (NYSE:AA), the big aluminum maker, will unofficially kick off another earnings season. Being the first influential company to announce the result for the new quarter makes it all more important for the rest of corporate America and the stock market.
The business profile of Alcoa Inc. (NYSE:AA) is such that it almost covers the entire world of global manufacturing, as it’s manufactured products are used by the construction industry, auto makers, and home appliance manufacturers. Though the recent history suggests that what’s been a good, or bad, quarter for Alcoa hasn’t exactly impacted everybody else.
In 2009, when Alcoa Inc. (NYSE:AA) missed Wall Street’s earnings forecast, 72.4 percent of the companies in the S&P 500 went on to beat the consensus profit estimate, FactSet data shows.
“It appears that Alcoa’s earnings performance relative to estimates has little predictive value in determining the earnings performance of the remaining companies in the index (S&P 500),” wrote FactSet senior earnings analyst, John Butters
If we look at last 10 years, the S&P 500 had gone up in value 15 of the 19 quarters, when Alcoa beat Wall Street’s profit estimate, while in the remaining 21 quarters, when Alcoa missed the consensus, the S&P 500 only went down a mere 0.6 percent over the next three months, as per the data compiled by Factset.
This year, up till now, Alcoa Inc. (NYSE:AA) has been cutting production to control expenses. Two items that will be worth watching in the upcoming earnings report will be, that for 2012, Alcoa has projected a global aluminum supply shortage, and a demand growth of 7%, on top of the 10% growth seen in 2011. Alcoa shares have gained 6 percent this year, with almost all those gains coming over the past three months.
A report from Stiffel Nicolaus, lowers its EPS estimates for the company, but at the same time gives it a ‘BUY’ rating, saying “We are lowering our 3Q12 EPS estimate ex-items from $0.11 to $0.01 vs. Street consensus of $0.01. For 2012, we are lowering our EPS estimate from $0.45 to $0.29, vs. Street consensus of $0.25”. Seasonal slowdown in Europe and declines in non-residential construction, along with Massena fire, will have a negative impact on the earnings of the company. The report also points “Alcoa’s Q12 results will continue to reflect an increasing reliance on mid and downstream operations, given the difficult environment for primary smelting”.