Alcoa Inc. (NYSE: AA) is set to kick off earnings season for the fourth quarter after the close on Tuesday. This matters more than any of us would like, mainly because Alcoa is the first DJIA component to report earnings each earnings season. Investors try to use this aluminum giant as a barometer for the entire earnings season.
Note that Alcoa was highlighted recently in our most undervalued and overvalued DJIA stocks for 2013.
The consensus estimates are $0.06 earnings per share (EPS), and sales are expected to be down more than 6.5% to $5.60 billion. WhisperNumber.com has a whisper number of $0.07 EPS and issued the following guidance:
Alcoa has a 36% positive surprise history (having topped the whisper in 18 of the 50 earnings reports for which we have data); Last quarter analysts expected earnings of $0.00 and the whisper number was $0.03. The company reported $0.03.
If we get guidance, the current quarter is expected to be $0.13 EPS and $6.08 billion in sales. For all of 2013, the Thomson Reuters consensus is $0.66 EPS and $24.94 billion in annual sales. We expect Alcoa to maintain its long-term stance that the global aluminum market will be twice the current size in 2020.
With the share price at $9.15 and a price of $8.68 on the last day of December, Alcoa shares are up 5.4% so far in 2013, and the 52-week range is $7.97 to $10.92. Thomson Reuters has a consensus price target of $10.16 today, but at the end of 2012 that one-year consensus price target objective was higher at $10.41.
Options traders are not expecting anything major in price terms, as the options pricing appears to be braced for a move of only $0.34 to $0.39 in either direction. Still, that would be a rather large move of close to 4%, if the outer move is hit (again, in either direction). We would note that the low VIX reading may be playing tricks here on options prices, as well.
Where Alcoa’s story gets interesting is on the chart (if charts can be interesting). In the past few trading days, we have seen Alcoa shares bounce up off of the 50-day moving average and then trade through and above the more important 200-day moving average. These figures are currently $8.57 on the 50-day and $8.82 on the 200-day moving averages. We saw a bit of the same chart pattern back in September, and that ended up failing to garner a turnaround. The earnings report in October also failed to generate any game-changing recovery.