Alcoa Inc. (NYSE: AA) is set to kick off first-quarter earnings trends today, and this will mark the start of earnings season. Investors and traders have for years tried to tie in this Dow Jones Industrial Average component as a true gauge of how they should evaluate each earnings season. Being first mover has its advantages, or its consequences.

Our initial take is that Alcoa may put a negative bias on the earnings trends. The good news is that we think the strong companies will be rewarded, and that the likely weakness from Alcoa is company specific or at least trend-specific to issues that are problems for Alcoa but not for the economy. The reason we feel this way is that Alcoa remains troubled and it is in a very hard industry that may not have the same problems as many other parts in the global growth engine. Alcoa was even listed among the top issues in our recent piece called Ten Things That Could Wreck the Bull Market.

We still look for Alcoa to maintain that the aluminum industry will be double by the end of this decade. Estimates from Thomson Reuters have dropped. The per-share earnings estimate was $0.10 at the end of last week, but that is now $0.08. Revenue estimates are lower as well, as the $5.93 billion in sales projected just last week is now set at $5.89 billion. The company may or may not offer specific guidance, but the Thomson Reuters consensus targets for the second quarter are $0.14 earnings per share and $6.23 billion in revenue. For all of 2013, the consensus estimates are $0.53 per share and $24.4 billion. Alcoa trades at about 15 times this year’s earnings estimates and just under 10 times the expected 2014 earnings estimates.

The weak stock price is another reason we are cautious. We have warned repeatedly that the market has lost its ability to properly discount events. That being said, Alcoa was down about 5% so far in 2013, while the broad markets were up more than 10% in the first quarter. Shares are mildly positive so far on Monday morning, but only by two cents at $8.26, against a 52-week range of $7.97 to $10.24.

We tried to track the aluminum exchange traded funds, and they are close to 52-week lows as well, but we have to point out that they are too thin in trading volume to be of much help. Century Aluminum Co. (NASDAQ: CENX) is in the middle of its 52-week range, while Reliance Steel & Aluminum Co. (NYSE: RS) and Kaiser Aluminum Corp. (NASDAQ: KALU) are actually much closer to their 52-week highs than they are the lows.

Another issue to consider is that Alcoa has a high short interest. That was pegged at 69.1 million shares, and while that is certainly not a high, it remains rather elevated at 4.6 days to cover.

We cannot use much on the charts here. While the stock is close to a 52-week low, Alcoa’s share price is challenging the lows going back to right after the great recovery from the recession. Lastly, analysts are just not that positive, as the consensus price target objective is only $9.73 as of now.

Our only issue is that the consensus has drifted lower and lower, and none of the internals look all that promising. What if everyone is wrong and things are just not as bad as investors fear? Alcoa might not need to have good earnings to get interest again. Maybe the company just has to be less-bad than expected.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.