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An Investor’s Guide to Alcoa’s 1Q 2015 Outlook

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Apr. 3 2015, Updated 5:06 p.m. ET

Alcoa’s 1Q 2015 outlook

Let’s now analyze Alcoa’s (AA) 1Q 2015 outlook. Alcoa expects demand from most of its customer segments to be strong in 2015, with the exception of the packaging sector. Alcoa expects the carbonated soft drinks industry in North America to be weak in 2015. However, demand from the company’s beer segment should help it offset the weakness in the soft drinks market.

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Alcoa’s guidance for 1Q 2015

The chart above shows the 1Q 2015 guidance that Alcoa’s management has given. As you can see, the after-tax operating income (or ATOI) for engineered products is expected to grow between 0% and 5% year-over-year.

The ATOI of global rolled products is also expected to be flat year-over-year. This ATOI excludes any impact from aluminum prices or currency movements. However, there has been a downward trend in aluminum prices over the last couple of months. The US dollar (UUP) has also gained ~5% against a basket of major currencies.

Primary volumes to be lower

Alcoa expects volumes in its primary segment to be lower in 1Q. This is because the company curtailed several plants last year. Other aluminum producers, like Rio Tinto (RIO) and BHP Billiton (BHP), have also reduced their production capacity.

Alcoa also expects a negative impact of ~45 million from lower power sales in Brazil. The iShares MSCI Brazil Capped (EWZ) gives you access to Brazilian equity markets.

Alcoa gets a major part of its revenues from aerospace and automobile companies. Boeing (BA) and Ford (F) are among Alcoa’s biggest customers. In the next part of this series, we’ll analyze how Alcoa’s end markets have played out in 1Q 2015.

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