Alcoa to Start Earnings Season Late Tuesday

There is an expectation that the aluminum giant will beat forecasts from analysts when it reports its revenue and earnings on Tuesday after the closing bell on Wall Street.

Alcoa, Inc the world’s third largest producer of aluminum has traditionally kicked off the quarterly earnings season. It will announce its results for the second quarter ending June 30, 2014.

A consensus of many analysts says the company will see a drop of over 3% in quarterly revenue from the same quarter last year. They predict revenue to be $5.6 billion and the lower revenue is expected due to lower aluminum prices compared to the second quarter of 2013.

Nevertheless, the adjusted earnings per share at the aluminum giant are predicted to increase by as much as 12 cents per share, which is 3 cents higher than that the first quarter of 2014, because of initiatives instituted for cost cutting that have been effective.

Alcoa has surpassed estimates in earnings in four of the past five quarters. During the first quarter of 2014, the company enjoyed adjusted earnings that were nearly 9 cents which beat analysts’ estimates that were 5 cents.

The company has also beaten estimates for revenue 3 times over the past 5 quarters. However, during the first three months of 2014, revenues reached $5.45 billion, while estimates by analysts were $5.55 billion.

The gross margin for the second quarter of 2014 is expected to by 17.85%, which is up from the second quarter of 2013 of 9.47%.

The gross margin estimate, which is favorable, has come following aggressive initiatives of cost cutting.

Putting aside the results for the second quarter, the future for Alcoa looks bright. Alcoa will thrive from demand in aluminum from the automobile and aerospace industries.

Over the first quarter, the company increased its expectations for growth in aerospace to 9% from 8%. The growth has been driven due to strong demand for commercial airplanes and regional jets.

Strong demand is expected for aluminum in the automobile industry thanks to environmental regulations forcing automakers to produce cars that are lighter.



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