[Ed. Note: This story was updated 1/9/14 after the Alcoa earnings report was released, after the closing bell.]
Alcoa Inc. (NYSE: AA) stock fell 4%, or $0.46, in after-hours trading Thursday to $10.28. The company reported earnings of $0.04 for Q4, missing estimates of $0.06.
Alcoa reported a net loss of $2.3 billion – $2.19 per share – on revenue of $5.59 billion. That revenue figure was slightly higher than the consensus estimate of $5.54 billion. Considering the price of aluminum dropped 7% in 2013, the numbers could certainly be worse.
For the full year, Alcoa reported a net loss of $2.3 billion – $2.14 per share – on revenue of $23 billion.
Prior to today, AA stock had climbed 14% in the last month, despite the fact that aluminum prices have remained low. Some analysts believe the end-of-the-year surge for AA stock was premature.
“We think optimism of a global recovery has fueled the majority of this move,” Anthony Rizzuto, analyst for Cowen & Co. told MarketWatch. “The issue that we continue to see is that the aluminum market remains challenged.”
Alcoa is forecasting growth of 7% in global aluminum demand in 2014, which is the same growth rate from 2013. Despite the growth in demand, the low price of aluminum should continue to pose issues for AA.
Alcoa also made news today when it reached a settlement with the Securities and Exchange Commission and the Department of Justice after being charged with bribing officials from the country of Bahrain.
An SEC investigation concluded that AA had made more than $110 million in bribery payments to Bahraini officials who were involved in the contract negotiations between the company and the country of Bahrain. Alcoa will be paying the SEC $175 million for the infraction.
Alcoa Inc. (NYSE: AA) stock rose 2.9% yesterday (Wednesday) ahead of today's fourth-quarter earnings report due after the bell.
Analysts are projecting earnings of $0.06 per share, down from $0.11 last quarter. At $5.54 billion, revenue estimates for AA are in line with the consensus estimate.
Alcoa used to be an earnings bellwether, although is no longer considered as one. Still, its earnings report is considered the official start to earnings season and is monitored for clues to global economic health.
Now the company hopes cost-cutting and restructuring measures it took last quarter make up for weak aluminum prices.
If Alcoa outperforms earnings estimates today, it will have done so for four consecutive quarters. That will help AA stock, which has gained 19.1% in the last 12 months and 2% since the start of the year.
Alcoa produces and manages aluminum through a variety of processes including mining, refining, smelting, and recycling. AA's products are used in automobiles, aircraft, construction, defense, packaging, and consumer electronics, among others.
Obviously, the price of aluminum has a major impact on Alcoa's earnings report. Aluminum prices have been down in previous quarters. Slowing Chinese growth and the European debt crisis are two factors that Trefis points out as reasons why aluminum demand will continue to decline. As aluminum demand declines, so do prices.
In Alcoa's Q4 earnings preview, analysts are focusing on how AA's growth matches with its previous growth projections. In Q3, Alcoa projected growth of 12% to 19% for the Chinese automotive segment, 9% to 10% for the aerospace segment, and 2% to 5% for the U.S. automotive segment. Alcoa had also projected growth of 7% in aluminum demand in 2013.
Alcoa (NYSE: AA) Stock
Alcoa stock was part of the Dow Jones Industrial Average until September 2013. It was removed due to its low stock price, and – according to a DJIA spokesperson – "the Index Committee's desire to diversify the sector and industry group representations of the index."
AA stock closed at $10.83 Wednesday, up 42% from its 52-week low of $7.63.
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