What to Expect From Alcoa Earnings

Alcoa Inc. (NYSE: AA) is scheduled to report its second-quarter financial results after the markets close on Monday. The consensus estimates from Thomson Reuters are calling for $0.10 in earnings per share (EPS) on $5.20 billion in revenue. In the same period of last year, Alcoa posted EPS of $0.19 and $5.90 billion in revenue.

Last September, Alcoa announced a plan to split into two separate companies. Alcoa Upstream which will be renamed Alcoa Corp. and will trade on the New York Stock Exchange with the existing AA ticker symbol. The current Alcoa will change its name to Arconic and trade under the ticker ARNC. Arconic will own 19.9% of Alcoa stock following the separation.

Arconic is what Alcoa management calls the value-added part of the current business. It includes products for the aerospace and auto industries among its various businesses. Last September Alcoa said that the aerospace market accounts for about 40% of the pro-forma revenues for the value-add company and revenues from the automotive sector are expected to rise by 2.4-times to $1.8 billion by 2018.

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Alcoa Corp.’s assets and liabilities include Alcoa’s bauxite, alumina, aluminum, cast products and energy businesses, as well as a rolled products business consisting of Alcoa’s rolling mill operations in Warrick, Indiana, and its 25.1% interest in the Ma’aden Rolling Company in Saudi Arabia.

Prior to the release of the earnings report, a few analysts weighed in on Alcoa:

• Merrill Lynch reiterated a Buy rating.
• Credit Suisse reiterated a Buy rating.
• Morgan Stanley reiterated an Overweight rating with a $12 price target.
• Deutsche Bank reiterated a Buy rating.
• Goldman Sachs has a Neutral rating with a $9 price target.
• JPMorgan reiterated a Neutral rating with a $9 price target.

So far in 2016, Alcoa has underperformed the broad markets, with the stock only flat during this time. Over the past 52 weeks, the stock is actually down 6%.

Shares of Alcoa closed Friday up 5% at $9.82, with a consensus analyst price target of $10.96 and a 52-week trading range of $6.14 to $11.50.

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