Its official, earnings season has begun and Alcoa (AA) has kicked things off with their report after the bell yesterday. AA was able to top estimates by showing a net loss of $143 million. “Excluding legal and environmental remediation costs, it had per- share profit of 3 cents” writes Sonja Elmquist of Bloomberg. Analysts had been expecting the company to break even or to show EPS of 0.01 depending on which sources you conglomerate [for more aluminum news and analysis subscribe to our free newsletter].
Revenue expectations of $5.6 billion were also topped with a report of $5.83 billion; shares were up a modest 0.66% in after-hours trading. While Alcoa was able to beat its marks, the firm still has a ways to go to get back to profitability, and their forecast for
the remainder of the year certainly won’t help. The firm reduced its forecast of global consumption of aluminum by 1% given an economic pinch in China. This issue has long been pressing the market, as many feel that the emerging economy may be headed for a major slowdown, putting pressure on industrial metals.
The IMF noted that growth in Chinese aluminum demand will likely slow from 14% in 2011 to 8.5% in 2012, causing many to approach the commodity and its related stocks with caution. Since the recession began in 2008, industrial metals have had a hard time bouncing back given a tumultuous housing sector and an uncertain future for emerging markets that had once exhibited dominant growth quarter after quarter [see also Marc Faber: Why Industrial Commodities Will Continue to Fail].
Aluminum will be a good commodity to keep an eye on given Alcoa’s meager forecast for the remainder of 2012. Other than playing the metal with AA, investors can also use the Global X Aluminum ETF (ALUM) which tracks the performance of the largest and most liquid listed companies that are active in some aspect of the aluminum industry.
Disclosure: No positions at time of writing.