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Alcoa to Kick Off Earnings Season of Enormous Headwinds: Dempsey

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Since Alcoa (AA) last reported earnings three months ago, the stock has fallen more than six percent, earning it the dubious distinction as the worst performer in the Dow Jones Industrial Average (^DJI).

Perhaps more shocking is the fact that analysts' second quarter earnings expectations for the aluminum producer have fallen a staggering 62% during the same period of time, FactSet data shows, to $0.06 per share to today from $0.16 at the end of March.

"I don't think it is pessimistic enough," says Ed Dempsey, co-manager of the ATAC Inflation Rotation Fund. Not only does he say that Alcoa is overrated as a purported bellwether of things to come, but he thinks earnings season as a whole is going to be rough.

Related: Wall Street Searches for Growth as Earnings Season Begins

"The headwinds are enormous, even if you have good earnings, and I don't think we're going to," he says, "so it's hard to see how you have a really rosy earnings season."

And he's not alone. In a note client this morning, Knight Capital's Peter Kenny writes that the upcoming profit parade will beat lowered expectations but will hardly be "a barn burner." And FactSet earnings analyst John Butters pegs growth expectations for the S&P 500 this quarter at 0.7% now, down from 4.2% at the start of the quarter.

Also set to hinder further gains, Dempsey says, is the fact that all-important guidance is likely to be very subdued in the face rising interest rates, fuel prices and uncertainty.

"The market is wringing out inflation expectations everywhere," he says, "so if there are no inflationary expectations, than earnings by definition should be lower."

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