Will Alcoa Earnings Blowout Be Enough to Maintain the Stock Surge?

Earnings came in at $0.18 in earnings per share and revenues of $5.85 billion. Thomson Reuters had estimates of $0.12 in earnings per share (versus $0.07 EPS a year ago) and $5.66 billion in revenue (down 3.3% from a year ago). All segments looked  profitable. WhisperNumber.com was up a penny from the consensus, and the number was way ahead of that on an earnings per share basis.

The company said that Engineered Products and Solutions delivered its highest after-tax-operating income in history of $204 million, with a record adjusted EBITDA margin of 23.1 percent. Alcoa’s Global Rolled Products after-tax-operating income was up 34 percent sequentially; and the Upstream business improved performance for 11th consecutive quarter.

As far as the aluminum industry, Alcoa said that its global aluminum demand growth forecast of 7 percent in 2014 has been reaffirmed, as well as that the global aluminum deficit is seen  increasing while the global alumina surplus is shrinking. Additional notes for 2014 are as follows:

• continues to project global aerospace growth of 8 percent to 9 percent;
• 2014 automotive growth of 1 percent to 4 percent;
• packaging growth of 2 percent to 3 percent;
• building and construction growth of 4 percent to 6 percent;
• industrial gas turbine market projected decline of 8 percent to 12 percent, on lower orders for new gas turbines and spare parts (unchanged);
• increased its 2014 estimate for the North America commercial transportation market to a range of 10 to 14 percent, from a previous range of 5 to 9 percent in the first quarter;
• globally continues to expect a steady commercial transportation market in 2014 of -1 to 3 percent due to weakness in the European market;
• Alcoa reaffirmed its 7 percent global aluminum demand growth projection for 2014.

Again, Alcoa offers its guidance in the company conference call rather than live in the report. The third quarter consensus estimates from Thomson Reuters are $0.14 in earnings per share (versus $0.11 a year earlier) and less than 1% drop in revenue to $5.71 billion. For 2014, the Thomson Reuters consensus estimate is $0.48 EPS (versus $0.33 EPS in 2013) and $22.61 billion in revenues (down 1.8%). Thomson Reuters is calling for $24.27 billion in 2015 revenues (up 7.3%) and for earnings to grow to $0.63 per share (versus $0.48 expected this year).

After closing at $14.85, the 52-week range is $7.68 to $15.18 and the after-hours reaction was up almost 2% at $15.15. With a gain of 40% so far in 2014, it is fair to wonder just how much of the geed news is priced in despite the handy beat.