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What Factors Are Driving Alcoa’s Performance?

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Oct. 20 2015, Published 8:41 a.m. ET

Alcoa’s performance

Alcoa (AA) closed at $9.42 on October 19. It fell 1.4% from the previous day’s closing. Alcoa’s stock has been falling since the company released its 3Q15 earnings after the markets closed on October 8. Alcoa has lost more than 14% in market capitalization since October 8. This includes a 6.8% correction in its share price on October 9 when the markets gave a thumbs down to its 3Q15 earnings.

Falling aluminum prices took a toll on Alcoa’s 3Q15 earnings. The company’s adjusted net income fell 70% YoY (year-over-year). For a detailed analysis of Alcoa’s 3Q15 earnings, you can read Alcoa Reported 3Q15 Earnings on October 8: Investor Takeaways.

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Next what?

After Alcoa’s 3Q15 earnings miss, the markets will start factoring how the earnings could play out in 4Q15. We’re still a long way from Alcoa’s 4Q15 earnings. They will be released on January 11, 2016. However, as an investor, you can track several industry indicators to get a sense of Alcoa’s financial performance. Investors who follow our monthly indicator series shouldn’t have been surprised by Alcoa’s financial performance in 3Q15.

Industry indicators

We’ve been discussing how falling aluminum prices could weigh on aluminum producers’ earnings including Century Aluminum (CENX), Rio Tinto (RIO), and South32 (SOUHY). Century Aluminum has been among the worst performing aluminum companies this year. Its share price fell ~80% so far in 2015, as you can see in the above chart.

Investors looking at direct exposure to aluminum can also consider the PowerShares DB Base Metals ETF (DBB). DBB invests one-third of its holdings in aluminum. DBB has lost more than 20% YTD (year-to-date). Base metal prices have fallen this year. In the next part, we’ll discuss the recent trend in aluminum prices.

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