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Alcoa (AA) to Report Q1 Earnings Results: What to Expect?

Zacks Equity Research

Alcoa Corporation AA is scheduled to release first-quarter 2019 results on Apr 17, after the market closes.

The company pulled off better-than-expected results in the last four quarters, the positive average earnings surprise being 75.22%. In the last reported quarter, the company’s earnings of 66 cents surpassed the Zacks Consensus Estimate of 32 cents by 106.25%.

In the past three months, shares of this company have decreased 2.4% against the industry’s growth of 7.4%.



Let us see how things are shaping up for Alcoa this quarter.

Factors to Affect Q1 Results

Alcoa — with solid asset base, internationally diversified operations and strong management team — is the world’s second largest bauxite miner and the largest alumina refiner outside China. Its tactical priorities, including reduction of complexities, strengthening of the balance sheet and rewarding shareholders handsomely, have set it apart from other players in the industry.

The company does not provide quarterly projections but a look at its annual forecast is likely to provide a picture for the to-be-reported quarter.

Alcoa projects global surplus for bauxite in 2019. Higher demand due to anticipated stockpiles in China will be partially offset by supply increase in Guinea, Indonesia and Australia. The company uses most of the bauxite production internally to refine to alumina while the rest is used for third-party businesses. It is worth mentioning here that Alcoa is working toward increasing third-party bauxite businesses. The company anticipates bauxite shipments to increase roughly 1.3% year over year in 2019.

For the first quarter of 2019, the Zacks Consensus Estimate for revenues from the Bauxite segment is projected to be $325 million, in line with the figure recorded in the fourth quarter of 2018. Moreover, bauxite production in the to-be-reported quarter is anticipated to decrease 3.4% sequentially.

In the Alumina segment, Alcoa projects global surplus in 2019, primarily induced by increased supply as a result of expansion efforts and softer demand in China. The company’s own aluminum smelters use most of the alumina produced while the rest is sold globally. It anticipates alumina shipments to be roughly flat to increase marginally in 2019.

For the first quarter of 2019, the Zacks Consensus Estimate for revenues from the Alumina segment is projected to be $1,316 million, lower than $1,699 million generated in the previous quarter. The top line will be adversely impacted by a sequential decline of 4.4% in alumina production and 17.1% fall in price realization.

In the Aluminum segment, Alcoa projects global deficit in 2019. Globally, demand is projected to increase 3-4%, with roughly 4-5% upside expected in China. However, the company’s aluminum shipments are predicted to decrease year over year in 2019 due to the end of an agreement (can sheet tolling) in the flat-rolled business. For the first quarter of 2019, the Zacks Consensus Estimate for aluminum production is predicted to decline 4.9%, sequentially while average price realizations (per metric ton) are likely to slip 21%.

Uncertainties related to global trade and headwinds, impacting product pricing and input pricing, remain concerning. Also, higher tax rate as well as high energy costs (for the first quarter) remain concerning. On the flip side, starting of the share buyback program, alterations to the company’s revolving credit facilities and collaboration to enhance carbon-free aluminum smelting technology will work in its favor.

Earnings Whispers

Our proven model provides some idea about the stocks that are about to release their earnings results. Per the model, a stock needs a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for a likely earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The case with Alcoa has been provided below.

Earnings ESP: Alcoa has an Earnings ESP of -3.45%. The Zacks Consensus Estimate for the to-be-reported quarter is pegged at 17 cents and the Most Accurate Estimate is pinned at 18 cents.

Alcoa Corp. Price, Consensus and EPS Surprise

 

Alcoa Corp. Price, Consensus and EPS Surprise | Alcoa Corp. Quote

Zacks Rank: The company currently carries a Zacks Rank #3.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are some companies in the Zacks Industrial Products sector that you may want to consider as these have the right combination of elements to post an earnings beat this quarter, per our model.

Chart Industries, Inc. GTLS has an Earnings ESP of +8.66% and a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

HD Supply Holdings, Inc. HDS currently has an Earnings ESP of +0.81% and a Zacks Rank #3.

Rockwell Automation, Inc. ROK presently has an Earnings ESP of +1.13% and a Zacks Rank #3.

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