ALCOA REPORTS IN-LINE EPS, MISSES REVENUES
I don’t want to place too much emphasis on the Alcoa earnings, but their report highlights some of the potential risks that have been baked into equity prices. Alcoa reported a solid quarter by almost any measure. Sales were up 17.8% year over year and Klaus Kleinfeld, Alcoa President and Chief Executive Officer says the environment is in fact improving:
“Our markets are gradually improving and both policy trends and consumer sentiment bode well for aluminum demand.”
Despite the clear improvement, equity investors are now pricing in a nearly flawless quarter for Q1 earnings. Alcoa’s bottom line of 10 cents EPS was in-line with expectations and the revenue line was shy of the $5.24B estimates. Alcoa’s EPS are notoriously lumpy, but this was the first time in 11 quarters that they have missed revenue estimates. Analysts are clearly pricing in robust revenue growth. “In-line” and revenue misses simply won’t cut it after a 16% rally in equities. Alcoa is by no means a fair measure of the entire market, but it does highlight some of the potential risks that have been baked into equities.
Why is the stock trading higher? They missed revenues for the first time in 11 quarters and investors are buying this news? This market is getting insanely irrational.
No clue. The Q2 estimates are baking in VERY robust growth. The revenue line seems to imply that end demand is a bit weaker than consensus expects. Q2 revs are calling for 16% sequential growth versus previous expectations of 9%. I would assume that estimates have to come down, but the market seems oblivious to this.
That seems to be the environment we’re in today though. Nothing matters expect the direction of the trend.
This is a classic Pump n’ Dump. I got crushed on a big Cube put position in 2007 and it was the first time Google ever missed earnings. Next morning it gapped to a new high and squeezed me until I couldn’t breathe – so I dumped at a massive loss. It then proceeded to sell non-stop for quite some time afterwards. My first lesson in risk management was a pricey one….
The expectation was not high going in. It was thought they might miss. T
okay i’ve posted too much but one more please forgive me
if one were to look at aluminum prices, they are screaming towards equilibrium which apparently is much higher than present … my guess is at least 50% higher
financial crisis over and they stop giving away inventory to pay the bills
Its bullish no matter what!
http://www.financialarmageddon.com/2010/04/just-like-2007-2000-1987.html
Didn’t they report after market close?
I wouldn’t base the after market as the sentiment going into tomorrow. (Right now, AA is trading at -.55% change)
35 mpg mandate would require all plastic and aluminum, no steel
aluminum prices expected to outperform
personally, i think what is insanely irrational is for one to look at the charts and assume markets always have to correct downward. we may be in an extended period of correcting to the upside. one could argue that after earnings are over the market is worth 1500 on the s&p or rather some level ‘as if’ the financial crisis never happened (on the charts)
The earnings results simply don’t match the kind of meteoric rise which we have seen in the markets.
looking at a 2 year chart of AA one could say it’s had a catastrophic descent.
i wouldn’t be a buyer of alcoa today but if aluminum prices were to skyrocket to 3 bucks a pound, i’d assume AA hits all-time highs
AA and CENX might be substitute aluminum etf’s