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How Did Alcoa and Other Aluminum Producers Fare in 3Q16?

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Nov. 21 2016, Published 11:35 a.m. ET

3Q16 earnings

The 3Q16 earnings season is nearly over, and most aluminum companies have reported their earnings for the quarter. In this series, we’ll look at major aluminum companies’ 3Q16 earnings and production profile. We’ll also analyze what factors could drive aluminum producers’ 4Q16 performances.

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Alcoa’s split

On November 1, 2016, Alcoa split into two new entities—Alcoa (AA) and Arconic (ARNC). The split completed the process that was initiated by the company in September 2015.

But the actual seeds of the split were planted almost a decade ago when Alcoa started to expand its value-add portfolio. Some observers point to Warren Buffett’s acquisition of Precision Castparts (BRK-B) as the final trigger for Alcoa’s split. (Check out Has Alcoa’s Split Lived Up to the Hype? for more about Alcoa’s split.)

Dismal earnings season

In terms of earnings, 3Q16 was a dismal quarter for US-based aluminum producers. Alcoa’s 3Q16 EPS (earnings per share) missed consensus estimates by roughly $0.01. Prior to this, Alcoa posted better-than-expected earnings for three consecutive quarters. The market’s (SPY) reaction to Alcoa’s 3Q16 earnings was quite negative, and the stock fell 11.4%.

Century Aluminum’s 3Q16 earnings missed consensus estimates by a wide margin. Analysts polled by Bloomberg expected Century Aluminum (CENX) to post EPS of $0.01 in 3Q16. However, the company returned a net loss in the quarter.

But along with EPS, there are several aspects that markets look for in aluminum companies’ quarterly financial results. In the next article, we’ll look at different aluminum producers’ 3Q16 production profiles.

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