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Alcoa Inc (AA) Second Quarter Earnings Preview

Alcoa is expected to report its financial results for the second quarter on Wednesday, June 8 at 5:00 in the afternoon. The aluminum producer is among the companies that would kick off the earnings season for the quarter.

Alcoa Inc (AA) Second Quarter Earnings Preview

During the previous quarter, the Alcoa posted $0.28 in earnings per share excluding special item. Its revenue increased 7% to $5.8 billion due to organic growth, which was primarily driven by strong volume in automotive and aerospace.

Alcoa transformation efforts

The company is transforming itself into a downstream aluminum, specialty metal, and value-added supplier. As part of its transformation efforts, Alcoa acquired TITAL to expand its casting capabilities with strong customer relationships in Europe.

It is also integrating Firth Rixson to its business and expected its revenue to increase by $1.6 billion with additional $35 million EBITDA in 2016.

Alcoa also announced its intention to acquire RTI International Metals last April to expand further its titanium offerings and complement the company’s mid and downstream value chain.

Alcoa expected Q2 financial results

Wall Street analysts expect Alcoa to achieve earnings of $0.23 per share on $5.79 billion in revenue for the second quarter based on data compiled by Yahoo! Finance.

Analysts at Trefis suggested that Alcoa’s efforts to improve its operational productivity such as closing its high-cost smelting capacity could help offset the impact of lower aluminum prices to its second-quarter results.

Alcoa permanently closed its Pocos de Caldas primary aluminum smelter in Brazil on June 30. The company made the decision to align better its business with the lower aluminum pricing environment.

Alcoa’s acquisitions over the past year should boost the volumes of its Engineered Products and Solutions (EPS) business, according to Trefis analysts. They noted that Alcoa’s acquisitions, smelting capacity closures, and investments boosted the company’s capacity for value-added products.

According to them, the company Global Rolled Products (GRP) and EPS divisions produce value-added light metal products with focus on the automotive and aerospace markets—represent 57.4% of Alcoa’s revenue in the first quarter, up from 54.4% in 2012.

Trefis analysts noted that Alcoa’s increasing emphasis on value-added products was shown on the company’s EPS segment shipment figures, which was up 17% year-over-year in the first quarter.

Based on the company’s ongoing portfolio transformation, Trefis analysts want to know the impact of Alcoa’s activities in its value-added business segments to its revenue and margin improvement.

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