18 Apr

Key Takeaways from Alcoa’s Q1 Earnings

WRITTEN BY Mohit Oberoi, CFA

Alcoa’s first-quarter earnings

Alcoa (AA) released its first-quarter earnings after the markets closed on April 17. The company reported revenues of $2.72 billion in the first quarter. The analysts polled by Thomson Reuters expected Alcoa to post revenues of $2.80 billion. The company posted revenues of $3.3 billion in the fourth quarter and $3.1 billion in the first quarter of 2018.

Key Takeaways from Alcoa’s Q1 Earnings

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Alcoa posted an adjusted EPS of -$0.23 in the first quarter. The company posted an EPS of $0.70 in the fourth quarter and $1.01 in the first quarter of 2018. The company also missed the consensus EPS estimates. Alcoa was trading lower in after-hours trading on April 17. The stock’s returns have trailed the SPDR S&P Metals and Mining ETF (XME) in 2019.

Other takeaways

Alcoa also lowered its 2019 aluminum demand growth forecast to 2%–3%. Previously, the company expected the global aluminum demand to grow between 3%–4% in 2019. Alcoa also lowered its forecast for the aluminum market deficit to 1.5 million metric tons–1.9 million metric tons. Previously, the company expected the deficit to be 1.7 million metric tons–2.1 million metric tons. In the commodity markets, a deficit means that demand is outstripping supply.

Since aluminum was also in a supply deficit last year, global aluminum inventories have come down. Alcoa sees falling aluminum inventories as a bullish driver for aluminum prices. Despite falling inventories and the supply deficit, aluminum has underperformed other base metals in 2019. During the first-quarter earnings call, Alcoa noted that China’s transportation, packaging, and electrical industries are witnessing a slowdown. Apparently, these three industries were among the biggest aluminum end users. So, a demand slowdown from these sectors is taking a toll on Chinese aluminum demand.

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