Alcoa (AA, Financial) reported its earnings for the second quarter of 2015 on July 8. While Alcoa is no longer a Dow Jones Industrial Average component, its earnings release still has a significant impact on the market since it signifies the beginning of the earnings reporting season in which a large majority of companies in the U.S. report on their quarterly earnings.
Overall, the earnings season appears to continue its focus on three main themes affecting the U.S. market in general. The strengthened dollar continues to take its toll on corporate earnings as realized profits are lower from sales abroad. Lower oil prices also continue to drag on the economy with energy company valuations specifically affected. Global volatility, the final factor, has also influenced the U.S. market with Greece’s debt crisis and China’s stock market adding to overall market volatility.
In Alcoa’s second quarter earnings release, it reported revenue for the quarter of $5.9 billion with earnings of $250 million resulting in earning per share of $0.19. Alcoa had a strong quarter from a revenue perspective beating analysts’ average revenue estimate of $5.79 billion. Earnings per share, however, were slightly lower than expectations, missing analysts’ consensus earnings per share estimate by $0.04.
Compared to the previous quarter, revenue was up 1.3% and earnings per share fell 32.1%. In comparison to the same quarter last year, revenue was 1.0% higher and earnings per share were up 5.6%.
The broad market economic factors appeared to have little effect on Alcoa’s second quarter revenue report. Revenue remained strong, up 1% from a year ago despite the stronger dollar effects from its international sales. Aerospace and automotive sales were especially strong for the quarter, with aerospace revenue up 29%. Both categories are expected to finish the year with strong annual sales growth. Aerospace sales are projected to grow 9%, while automotive sales growth is expected to be 4% higher in 2015.
Alcoa’s stock price closed at $10.50 prior to its after the bell earnings release on July 8. For the quarter the stock is down 13.7% and year-to-date it is down 33.5%. It currently has an approximate discounted cash flow value of $9.63.
Portfolio manager trading activity has been fairly active in recent months with Steven Romick (Trades, Portfolio) of FPA Crescent and Manning and Napier adding to their portfolio holdings in the stock. On June 30,Ă‚ Steven Romick (Trades, Portfolio) added 11,339,900 shares of Alcoa to increase his portfolio position in the stock to 3.27%. On June 30,Ă‚ Manning and Napier also added to its holdings of Alcoa buying 11,655,296 shares and increasing its portfolio allocation to 1.49%.
