Alcoa Inc. (NYSE: AA) is set to kick off the new earnings season after it reports earnings on Monday after the closing bell. Many investors use Alcoa as a bogey for the entire economy, and the metals sector, when it reports. That tie may seem less relevant to many investors now that Alcoa has been booted out of the Dow Jones Industrial Average. The thing to consider though is that Alcoa is a more diversified and better company than when it left the Dow.
Earnings estimates for its fourth quarter were most recently seen at $0.27 per share on $5.99 billion in revenues. That would represent over 7% revenue growth and compare to earnings per share of $0.04 a year ago.
There are a few things to consider going into earnings. The first is that the $0.27 per share target from analysts was just $0.25 a week or so ago, and it was closer to $0.20 around 90 days ago. Another consideration is that Nomura came out on Monday morning and upgraded Alcoa’s stock rating to Buy from Neutral ahead of earnings.
What stands out in the Nomura upgrade is that the firm also lifted its price target to $23 from $15 in the call. Alcoa’s consensus analyst price target is $18.72, but the highest analyst price target is up at $25.50.
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Alcoa has consensus earnings estimates for the first quarter of $0.27 per share, on revenue growth of 15% to $6.28 billion. For fiscal 2015, the estimates are $1.06 in earnings per share and revenue growth of 9% to $25.6 billion.
Alcoa’s stock chart is in an interesting position ahead of earnings. Just on Monday morning the stock went back above the 50-day moving average (now at$16.25) for the first time in over a month. Only a week ago Alcoa was bouncing off the 200-day moving average (now at $15.32).
Another issue to consider is the trading of stock options. It seems that the options traders are braced for a move of almost $0.50 per share in either direction. If that turns out to be correct, then the options traders are looking for a move of up to around 3% or so in either direction.
Alcoa used to be treated as the directional bias company for earnings season. Whether or not that is still the case now is up for grabs.
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