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3 Things to Watch When Alcoa Releases Earnings

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3 Things to Watch When Alcoa Releases Earnings


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Alcoa (NYSE: AA) Alcoa is expected to report earnings of $0.12 per share, up from $0.07 per share in last year’s second quarter. Revenue, however, is expected to drop 3.3% year-over-year to $5.66 billion. Scheduled to report first quarter results July 8th after markets close. Photo credit: Alcoa


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So far, Alcoa is off to a great start in 2014. The company handedly beat earnings estimates last quarter. Photo credit: Alcoa


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Because of that Alcoa’s stock has taken off this year.


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That positive momentum can be continued if the company succeeds in the following three areas…


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1. Look to see if Alcoa can at least meets earnings estimates: Last quarter Alcoa earned $0.09 per share, which was 80% higher than analysts were expecting. This quarter analysts expect the company to earn about $0.12 per share, though the range is anywhere from $0.09 per share to $0.16 per share. In order to maintain its positive momentum the company needs to at least meet the average consensus estimate.


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2. Keep an eye to ensure that Alcoa can deliver continued growth in its value-add segments: Recently announced the acquisition of Firth Rixson to strengthen its aerospace offering. Alcoa has announced a number of investments in value-add businesses like automotive, packaging and aerospace, while reducing its lower margin smelting capacity. Look for additional announcements as Alcoa’s portfolio transformation continues.


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2. Keep an eye to ensure that Alcoa can deliver continued growth in its value-add segments: Recently announced the acquisition of Firth Rixson to strengthen its aerospace offering. Alcoa has announced a number of investments in value-add businesses like automotive, packaging and aerospace, while reducing its lower margin smelting capacity. Look for additional announcements as Alcoa’s portfolio transformation continues. Source: Alcoa Investor Presentation


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3. Watch for any other big changes on the balance sheet: As of last quarter Alcoa had $655 million of cash on hand and its net debt-to capital ratio was 33%. However, the acquisition of Firth Rixson includes $2.35 million in cash, which is being funded by added debt. Company remains committed to an investment grade credit rating. Any weakness in its value-add segment could have an impact on its credit metrics.


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Alcoa’s transition from a commodity focused company to one profiting from adding value to that commodity is going well. As long as that transition continues, the company’s stock should keep rewarding investors. Photo credit: Alcoa


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