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Why Alcoa Investors Should Track Ford 1Q Earnings

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Ford 1Q earnings

Ford 1Q earnings are expected on April 28. Kaiser Aluminum (KALU) is also expected to release its earnings on the same day, after the close of market hours. Ford (F) is an important customer for Alcoa (AA), and its latest F-150 pickup truck is the first mass market aluminum body vehicle. Ford currently forms 2.76% of the Consumer Discretionary Select Sector SPDR ETF (XLY).

Companies like Alcoa and Constellium (CSTM) have placed huge bets on the increasing aluminum usage in vehicles. Alcoa is ramping up its capacity to serve the automobile companies, while CSTM acquired Wise Metals, a privately held aluminum company, to serve the automotive sector.

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Total sales of Ford’s F series vehicles had earlier declined by 4.6% in March. However, the retail sales of F series had jumped 10% in the month. Ford says the jump is part of the company’s strategy to prioritize retail sales. Alcoa investors should track Ford’s commentary on the customer acceptance and the outlook for its F-150 pick-up.

Vehicle sales

Vehicle sales in the United States have been strong. This can be seen in the previous chart. Vehicle sales have been at more than 16 million SAAR (or seasonally adjusted annual rate) for the last several months. In the latest reading in March, vehicle sales were 17.05 million SAAR, up 4.4% on a year-over-year basis. Low interest rates, the launch of new vehicle models, and rising consumer confidence are some of the primary reasons for the uptrend in vehicle sales.

Rising US vehicle sales bode well for Alcoa, which gets almost half of its revenues from the US markets. However, a quarter of Alcoa’s sales come from Europe. In the next part, we’ll discuss the indicators of Europe aluminum demand.

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