Trading Analysis: Alcoa Earnings Preview
By: Colin Cieszynski, CFA, CMT, CFTe, Chief Market Strategist, CMC Markets
Alcoa officially kicks off earnings season after US exchanges close on Wednesday April 8th, which could set the tone for the earnings season to come.
Alcoa’s results may indicate how strong some of the factors that could impact earnings may potentially be this time around.
First, some technology companies complained last quarter about the potentially negative impact of a rising US Dollar on their earnings. As USD has continued to rise in the quarter, Alcoa may give an idea if the strong dollar is starting to have more of an impact.
Second, Alcoa results may indicate how resource companies fared in the quarter. The aluminum price dropped dramatically in December, tried to rebound between mid-January and mid-February and then resumed its downtrend hitting a 52-week low in March. The results may give an indication of whether commodity prices are bottoming or if there could be more room to fall further.
Third, there have been signs of sluggish economies in the US and China in recent weeks, which have depressed base metal prices. Any comments the company may have on economies around the world and the demand from customers in different industries may give an idea of who have been the winners and losers in a lower oil price environment.
The street is expecting Alcoa to earn $0.25 per share on revenues of $5.9B, essentially the same as last year. Last quarter, Alcoa surprised the street, earning $0.33, well above the $0 27 consensus estimate as sales of $6.3B also beat the street who was at $6.05B. Based on this, expectations don’t appear unreasonable.
Focus Chart: Alcoa
Through the second half of Q1, Alcoa shares were under pressure falling from near $17.00 toward $12.50 before finally finding some support. Although it has rebounded a bit recently, and the RSI suggests that momentum has started to turn upward once again, the technical picture remains cloudy. Alcoa would need to retake $14.00 where it fell through a channel bottom, and 50 on the RSI to confirm an upturn.
Overall, expectations appear to be relatively low, leaving the door open to another surprise beat although guidance may also be a factor in how the street reacts to the news.
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