Alcoa Inc (NYTSE:AA) will release its earnings numbers for the three months ending September 30 this afternoon after the bell rings on Wall Street. The company has for many years been seen as an earnings season bellwether, but this year will be different. The company was removed from the Dow Jones Industrial Average last month.
In the lead up to the announcement of these results, analysts following Alcoa Inc (NYSE:AA) were looking for earnings of 6 cents per share from the company on revenues totaling $5.7 billion. In the same quarter of 2012, the company earned 3 cents per share on revenue of $5.8 billion.
Alcoa has had a tough couple of years and the analysts are not expecting that to change anytime soon. Alcoa Inc (NYSE:AA) shares will open at $7.97 today, down close to 3 percent in the last five days of trading.
Aluminum price drop hits Alcoa
A Trefis report on Alcoa Inc (NYSE:AA) cited lower aluminum prices in the last quarter as a reason to be cautious on this report. The report put a price target of $7 on the firm’s shares and projected that today’s earnings would be soft.
Lower demand from Europe and China have contributed to the fall in aluminum demand. With trends in both of those countries projected to continue, it is likely that aluminum prices will stay low and Alcoa Inc (NYSE:AA) will continue to suffer.
Alcoa Inc (NYSE:AA) is by no means finished, but its removal from the DJIA is a sign of the company’s decline in recent years. The lack of diversification at Alcoa has made it incredibly susceptible to the global price of aluminum, and that’s not a product it controls exclusively.
Alcoa is organized into four major divisions, two of which are heavily influenced by the price of aluminum. This year’s relatively poor aluminum pricing means that the company is unlikely to recover. As Alcoa Inc (NYSE:AA) continues to reorganize itself, however, it may see a meaningful change in its business. The firm is undergoing major shifts in operation right now.
Aloca Inc (NYSE:AA) has been concentrating on value added aluminum products in order to escape the aluminum price trap. The Trefis analysis suggests that this move is a good one for the company, but there are a lot of unknowns in the business. The amount of demand growth in China in particular is difficult to forecast.