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Alcoa: Key Updates Markets Might Watch


Dec. 4 2020, Updated 10:53 a.m. ET


In the previous part, we discussed analysts’ projections for Alcoa’s (AA) third-quarter earnings. In this part, we’ll look at the key updates that markets might watch in Alcoa’s third-quarter earnings call.

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Earnings guidance

During the second-quarter earnings release, Alcoa lowered its 2018 adjusted EBITDA guidance to $3.0 billion–$3.2 billion from the previous guidance of $3.5 billion–$3.7 billion. The guidance assumed unpriced aluminum sales at $2,100 per metric ton and an API (Alumina Price Index) of $465 per metric ton. During the third-quarter earnings call, markets will likely watch Alcoa’s updated 2018 guidance. The company’s API assumption would be crucial because alumina prices have been volatile this year. Companies like Century Aluminum (CENX) are negatively impacted when alumina prices rise. The companies buy alumina from outside parties. However, integrated producers like Rio Tinto (RIO), that also sell alumina, stand to gain from higher alumina prices (XME).


During the second-quarter earnings call, Alcoa predicted a wider deficit in aluminum markets from its previous projection. As we noted in Part 1, China’s aluminum demand growth rates look to have cooled off—reflected in falling car sales and moderating real estate activity. During the third-quarter earnings call, markets will likely watch Alcoa’s views on global aluminum markets due to the backdrop of the US-China trade war. Notably, the International Monetary Fund decreased its growth outlook amid concerns about global growth. Metal demand is closely tied to economic activity. Read Alcoa: Should You Be Bottom Fishing? to see whether Alcoa offers value at the current stock prices.


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