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Alcoa or Arconic: Who Did Best in 2Q16?

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2Q16 and fiscal 2016

Fiscal 2016 is perhaps the most crucial year for Alcoa (AA) since it was incorporated in 1888. Alcoa has been a pioneer in aluminum production technology, and aluminum production has been the primary business of Alcoa for years.

But under its transformation strategy, Alcoa has turned into a diversified engineering company. Alcoa now is not only a primary aluminum producer now but also well spread across the aluminum value chain. Along with primary aluminum, it also manufactures several alloy products to serve its customers.

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Alcoa’s split

However, later this year, the two business will separate into two entities—Alcoa and Arconic. The chart above shows the timeline of Alcoa’s split. The two companies will have a totally different competitive landscape after the split.

Alcoa will compete with primary producers (GNR) like Century Aluminum (CENX) and Norsk Hydro (NHYDY). Arconic, on the other hand, will list Precision Castparts (BRK-B), Woodward (WWD), and Constellium (CSTM) as its competitors.

2Q16 earnings

Alcoa (AA) released its 2Q16 financial results on July 11. It reported EPS (earnings per share) of $0.15 after adjusting for special items. In contrast, Alcoa had reported an adjusted EPS of $0.07 in 1Q16 and $0.19 in 2Q15.

Alcoa’s 2Q16 earnings came in higher than the average analyst expectations. Alcoa has now delivered better-than-expected earnings for three consecutive quarters. You can read more about Alcoa’s consolidated 2Q16 earnings in our series Alcoa’s 2Q16 Earnings: Everything You Need to Know.

But since 2016 is mostly about Alcoa’s split, we should also be keeping track of how the two entities performed in 2Q16. In this series, we’ll analyze how the two entities—the new Alcoa and Arconic—performed in the most recent quarter. We’ll start with Alcoa’s upstream business.

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