S&P 500   3,585.62
DOW   28,725.51
QQQ   267.26
Want to Increase Your Conversion Rates? This Is the Biggest Threat to Your Success.
Market Wizard Reveals: The One Ticker Retirement Plan (Ad)
Russia accused of 'kidnapping' head of Ukraine nuclear plant
EU chief: New Greece-Bulgaria gas pipeline 'means freedom'
Market Wizard Reveals: The One Ticker Retirement Plan (Ad)
Danish Energy Agency says Nord Stream 2 gas pipeline under Baltic Sea appears to have stopped leaking gas
India launches 5G services, Modi calls it step in new era
Market Wizard Reveals: The One Ticker Retirement Plan (Ad)
UK train strikes and energy hikes add to a week of turmoil
NIH to fund unproven ALS drugs under patient-backed law
S&P 500   3,585.62
DOW   28,725.51
QQQ   267.26
Want to Increase Your Conversion Rates? This Is the Biggest Threat to Your Success.
Market Wizard Reveals: The One Ticker Retirement Plan (Ad)
Russia accused of 'kidnapping' head of Ukraine nuclear plant
EU chief: New Greece-Bulgaria gas pipeline 'means freedom'
Market Wizard Reveals: The One Ticker Retirement Plan (Ad)
Danish Energy Agency says Nord Stream 2 gas pipeline under Baltic Sea appears to have stopped leaking gas
India launches 5G services, Modi calls it step in new era
Market Wizard Reveals: The One Ticker Retirement Plan (Ad)
UK train strikes and energy hikes add to a week of turmoil
NIH to fund unproven ALS drugs under patient-backed law
S&P 500   3,585.62
DOW   28,725.51
QQQ   267.26
Want to Increase Your Conversion Rates? This Is the Biggest Threat to Your Success.
Market Wizard Reveals: The One Ticker Retirement Plan (Ad)
Russia accused of 'kidnapping' head of Ukraine nuclear plant
EU chief: New Greece-Bulgaria gas pipeline 'means freedom'
Market Wizard Reveals: The One Ticker Retirement Plan (Ad)
Danish Energy Agency says Nord Stream 2 gas pipeline under Baltic Sea appears to have stopped leaking gas
India launches 5G services, Modi calls it step in new era
Market Wizard Reveals: The One Ticker Retirement Plan (Ad)
UK train strikes and energy hikes add to a week of turmoil
NIH to fund unproven ALS drugs under patient-backed law
S&P 500   3,585.62
DOW   28,725.51
QQQ   267.26
Want to Increase Your Conversion Rates? This Is the Biggest Threat to Your Success.
Market Wizard Reveals: The One Ticker Retirement Plan (Ad)
Russia accused of 'kidnapping' head of Ukraine nuclear plant
EU chief: New Greece-Bulgaria gas pipeline 'means freedom'
Market Wizard Reveals: The One Ticker Retirement Plan (Ad)
Danish Energy Agency says Nord Stream 2 gas pipeline under Baltic Sea appears to have stopped leaking gas
India launches 5G services, Modi calls it step in new era
Market Wizard Reveals: The One Ticker Retirement Plan (Ad)
UK train strikes and energy hikes add to a week of turmoil
NIH to fund unproven ALS drugs under patient-backed law

Alcoa Is Well-Positioned For 2022 and 2023

Alcoa Is Well-Positioned For 2022 and 2023

Alcoa Increases Capital Returns, Shares Bottom 

Shares of Alcoa (NYSE: AA) are down nearly 50% from their high and they move lower but we don’t think they will go much lower. While aluminum prices are down sharply from their recent high the outlook for demand is expansionary and prices are expected to rebound by next spring. Near-term headwinds like lock-downs in China, supply chain disruptions, inflation, and fear of recession are weighing on the outlook or prices but many of those issues are temporary and there are signs of relief. For one, lockdowns in China are largely over and for another, shipping and freight issues are easing and aiding the current results as well. The takeaway is that Alcoa, unlike a large portion of the aluminum industry, is well-positioned for the dip in aluminum pricing and even able to increase its capital returns. 

Alcoa is not a robust dividend payer but it is a safe-looking distribution given its young age. The company has only been paying for the last few quarters so there is some risk here but the telltales are not signaling a warning. The $0.30 in annual payout is about 11% of the Q2 earnings let alone the FY comparison which leaves ample room for future increases. The more important factor for investors to be aware of is the share repurchase program which we see aiding today’s opportunity. The company repurchased shares worth about 3% of the current market cap and increased the authorization by another $0.50 billion or 6% of the market cap. Assuming the results continue to come in as the company expects, we see the buyback increase again by the end of the fiscal year if not sooner. 


Alcoa Revenue Up 35% From Pre-Pandemic Levels 

Alcoa had a strong quarter and that puts the outlook into a different perspective, the potential for flat earnings over the next quarter or two means earnings will track at a record level for the next quarter or two and we like the sound of that. Until then, the Q2 revenue came in at a record $3.64 billion for a growth of 28.6%. This is on top of last year’s 31% advance and is up 34% versus 2019. The gain was driven by the combination of pricing and volume with Alumina's net revenue up 26% sequential and Aluminum up 6%.

Alcoa posted a strong margin as well with the operating margin up more than 100 basis points on a GAAP basis. The offsetting news, however, is the adjusted operating margin contracted by 390 basis points but there are mitigating factors including a favorable reversal in accounting charges and a mark-to-market improvement in the value of energy derivative hedges. Regardless, the $2.67 in adjusted EPS is up nearly 80% from last year and beat the Marketbeat.com consensus by $0.18. 

The company did not give specific guidance for revenue or earnings but did comment on its expectations for volume. The company is upping its targets for aluminum volume but that is offset by a decline in Alumina and Bauxite. In regard to earnings, the company is expecting strength in the Bauxite segment but forecasts higher costs will cut into the Alumina and Aluminum segments. Mixed news but otherwise good news in regard to the longer-term outlook and the forecast for aluminum prices. 

The Technical Outlook: Alcoa Hit A Bottom 

The price action in Alcoa hit a bottom a few weeks before the earnings were announced and it may be ready to reverse. The caveat is that price action has been tepid so far which leads us to think a sideways movement is a more likely scenario. Assuming the stock can build a base of support at this level and deliver on its outlook, we see the stock moving sideways over the next few months and then moving higher. If, however, the global economy continues to deteriorate, the stock could wallow at these levels for an extended period of time. 

Alcoa Is Well-Positioned For 2022 and 2023

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Alcoa (AA)
2.4758 of 5 stars
$33.66-5.0%1.19%6.61Hold$78.55
Compare These Stocks  Add These Stocks to My Watchlist 

Should you invest $1,000 in Alcoa right now?

Before you consider Alcoa, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Alcoa wasn't on the list.

While Alcoa currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

Thomas Hughes

About Thomas Hughes

Contributing Author: Technical and Fundamental Analysis

Thomas got his start with the markets while working as a Chef. In 2005 a chance invitation to attend the seminar “How To Buy And Sell Your Own Stocks” altered his worldview. Soon trading and stocks consumed his every waking moment to the point of excluding all else. Thomas now enjoys a much different lifestyle engaged in his true passion, uncovering great investments.
Contact Thomas Hughes via email at tmhughes.writeon@gmail.com.
Free Email Newsletter

Complete the form below to receive the latest headlines and analysts' recommendations for your stocks with our free daily email newsletter:

Most Read This Week

Recent Articles

Search Headlines:

Latest PodcastFed Raises Rates: 3 Stocks to Watch Newmont Mining, Walmart, AMC

Axel Merk, President and CIO of Merk Investments has three very different stocks he frames within the current market and economic conditions.

MarketBeat Resources

Premium Research Tools

MarketBeat All Access subscribers can access stock screeners, the Idea Engine, data export tools, research reports, and other premium tools.

Discover All Access

Market Data and Calendars

Looking for new stock ideas? Want to see which stocks are moving? View our full suite of financial calendars and market data tables, all for free.

View Market Data

Investing Education and Resources

Receive a free world-class investing education from MarketBeat. Learn about financial terms, types of investments, trading strategies and more.

Financial Terms
Details Here
MarketBeat - Stock Market News and Research Tools logo

MarketBeat empowers individual investors to make better trading decisions by providing real-time financial data and objective market analysis. Whether you’re looking for analyst ratings, corporate buybacks, dividends, earnings, economic reports, financials, insider trades, IPOs, SEC filings or stock splits, MarketBeat has the objective information you need to analyze any stock. Learn more about MarketBeat.

MarketBeat is accredited by the Better Business Bureau MarketBeat is rated as Great on TrustPilot

© American Consumer News, LLC dba MarketBeat® 2010-2022. All rights reserved.
326 E 8th St #105, Sioux Falls, SD 57103 | contact@marketbeat.com | (844) 978-6257
MarketBeat does not provide personalized financial advice and does not issue recommendations or offers to buy stock or sell any security.

Our Accessibility Statement | Terms of Service | Privacy Policy | Do Not Sell My Information | RSS Feeds

© 2022 Market data provided is at least 10-minutes delayed and hosted by Barchart Solutions. Information is provided 'as-is' and solely for informational purposes, not for trading purposes or advice, and is delayed. To see all exchange delays and terms of use please see Barchart's disclaimer.