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Will Raw Material Cost Inflation Mar Alcoa's (AA) Q2 Earnings?

Alcoa Corporation AA is set to release second-quarter 2022 earnings numbers on Jul 20, after market close.

The Zacks Consensus Estimate for AA’s second-quarter earnings has been revised downward by 10.9% in the past 60 days. However, the company has an impressive earnings surprise history, having outperformed the Zacks Consensus Estimate in each of the preceding four quarters.

Let’s see how things are shaping up for Alcoa this earnings season.

Alcoa Price and EPS Surprise

Alcoa Price and EPS Surprise
Alcoa Price and EPS Surprise

Alcoa price-eps-surprise | Alcoa Quote

Factors to Note

Alcoa’s second-quarter performance is expected to have benefited from higher shipments and pricing in the Aluminum segment. Increased shipments for value-add products are likely to have driven total shipments in the segment. Higher shipments and pricing are expected to get reflected in Aluminum segment revenues. The Zacks Consensus Estimate for Aluminum segment’s total sales (third-party sales + intersegment sales) for the second quarter indicates a 20.6% jump from the year-ago reported quarter’s figure.

Strong third-party pricing and higher shipments are likely to have aided the Alumina segment’s performance as well. The consensus mark for Alumina segment total sales (third-party sales + intersegment sales) suggests a 41.5% surge from the second-quarter 2021 reported number.

However, increased raw material and energy costs are likely to have hurt Alcoa’s bottom line in the second quarter. Persistent supply chain disruptions might have also impacted the company’s performance.

What Does the Zacks Model Say?

Our proven model does not conclusively predict an earnings beat for Alcoa this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates, which is not the case here, as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Alcoa has an Earnings ESP of -15.95% as the Most Accurate Estimate is pegged at $2.74, lower than the Zacks Consensus Estimate of $3.26. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Alcoa carries a Zacks Rank #5 (Strong Sell).

Highlights of Q1 Earnings

Alcoa’s first-quarter 2022 earnings of $3.06 per share beat the Zacks Consensus Estimate of $2.99. The bottom line improved significantly year over year. Although, the company’s total revenues of $3.29 billion increased year over year, it missed the Zacks Consensus Estimate by 5.80%.

Stocks to Consider

Here are some companies you may want to consider from the Zacks Industrial Products sector, as our model shows that these have the right combination of elements to post an earnings beat this season:

Crane Holdings CR has an Earnings ESP of +6.98% and a Zacks Rank #2. The company is slated to release second-quarter 2022 financial numbers on Jul 25.

Crane Holdings’ earnings have surpassed the Zacks Consensus Estimate in each of the preceding four quarters, the average beat being 22.2%.

Zebra Technologies ZBRA has an Earnings ESP of +2.15% and a Zacks Rank #3. The company is scheduled to release second-quarter 2022 earnings numbers on Aug 2.

Zebra Technologies’ earnings have trumped the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 8.8%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


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