Alcoa Inc (AA.US) will release its first quarter 2022 results on April 20 after the US stock market closes. In the past four quarters, the company has outperformed analysts’ expectations, beating them by an average of 27.08%.
Alcoa reported $2.50 earnings per share in the last quarter, beating the general estimate of $2.04 from analysts at forecasting platform Zacks Consensus by 22.55%. Over the past three months, the company’s shares have risen as much as 49 percent, compared with a 21.2 percent gain for the industry as a whole.
In March this year, LME aluminium futures prices once rose above US$3,500 per tonne, exceeding the 2008 peak and setting a new record high, with LME aluminium prices rising by as much as 17% since this year. At present, LME aluminium prices continue to hover near historic highs, and with the LME’s aluminium metal inventories continuing to decrease, aluminium prices are still likely to continue to set new records.
Analysts generally expect Alcoa to benefit from strong market demand for aluminium and value-added products in the first quarter. The company’s revenues are likely to be enhanced by strong production and large shipments of smelter-grade alumina and aluminium metal on a backdrop of rising commodity prices due to factors such as tensions between Russia and Ukraine, and supported by strong demand. In addition, the company’s efforts to improve bauxite production could prove very favourable to the company in the upcoming quarterly results.
Growing enthusiasm for the company’s Sustana and EcoSource product lines may also boost the company’s first quarter results. Alcoa’s focus on operational execution and commercial effectiveness, as well as the application of digital technology in operational and cost control initiatives, may improve margins and profitability in the upcoming quarter.
However, lower bauxite shipments and supply chain challenges in end markets may adversely affect Alcoa’s first quarter results. In addition, given the broad geographic spread of the company’s businesses, its operations are adversely affected by global economic and political risks and foreign exchange fluctuations, of which a stronger U.S. dollar could hurt Alcoa’s revenue from overseas operations in the first quarter of 2022.
Analysts generally expect the company to report first quarter total revenue of $3.496 billion, up 21.8% and 4.7% from the year-ago and previous quarters, respectively, according to forecasts from Zacks Consensus; analysts’ general expectations for the company’s earnings of $3.05 per share imply a year-over-year growth rate of 286.1% and a 22% sequential growth rate.
Forecast data from information and statistics platform Seeking Alpha shows that analysts generally expect Alcoa’s Q1 revenue to be $3.49 billion and GAAP-compliant EPS to be $2.89.
Stocks may see a new wave of explosion
Since the beginning of this year, the wind has started to shift from technology stocks to cyclical stocks in the US stock market, benefiting from soaring commodity prices and growing demand for commodities due to the global economic recovery. Year-to-date, Alcoa shares have risen a staggering 50.3% and are continuing to gain momentum, with the stock trading at $89.450 as of yesterday’s close.
According to statistics from the Zacks platform, whenever Alcoa’s EPS beats estimates, the stock is likely to see an upward wave. Based on the above data and analysis, it is likely that Alcoa’s overall Q1 earnings will again beat estimates.
Goldman Sachs previously raised its target price for Alcoa to $115 from $88 and reiterated its “buy” rating on the stock. Goldman Sachs said in a research note that geopolitical events have further pushed up aluminium prices, while rising electricity prices, corporate production cuts and supply chain bottlenecks continue to disrupt the aluminium market.
Goldman Sachs also said that Alcoa should now enjoy higher pricing levels than in the past, given the company’s improving financial levels, the prospect of structural growth in aluminium demand and the company’s focus on decarbonisation technology.
In a recent report, analysts at Bank of America put together a list of “buy” rated stocks that are likely to beat analysts’ general expectations for quarterly profits and revenues, and Alcoa is on that list.
Post time: Apr-20-2022