Alcoa's Quiet Comeback (NYSE:AA)
Investors push Alcoa Inc. (NYSE:AA) aside every earnings season after they report, yet the company's stock price has increased 30% since September.
The market tends to only pay attention to Alcoa (AA) on a quarterly basis, when they kick off earnings season, then we forget about the company after they report yet another mixed bag quarter and guidance. Alcoa is the first of the Dow Industrials component firms to release earnings each quarter. Perhaps more important: it is traditionally the first major company to report results for the most recent calendar quarter. We tend to forget about Alcoa because looking back at their past earnings report, they miss estimates more than 50% of the time. That's right, flip a coin if you will every quarter on the outcome and that's exactly what traders do, buying up options and getting ready for what will be an up or down week depending on Alcoa's fate.
Over the past 12 months Alcoa (AA) shares have traded between $9.81 and its 52-week high of $17.60. Alcoa shares are now trading with a P/E Ratio of 0 and EPS of -0.31 (that doesn't help much), today they are priced in the mid $14 range. Why even consider buying this stock if its already up almost 1/3 in three months?
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Alcoa holds the crown as the world's leading producer of aluminum, bie it primary aluminum, fabricated aluminum or alumina. The best part, the company expects the price of aluminum to rise in the next 10 years as demand exceeds supply, according to Klaus Kleinfeld, the chief executive officer of Alcoa Inc., the Financial Times reported on Nov 17th.
In an interview with the newspaper, Kleinfeld said supply constraints will restrict aluminum production and all the new plants that are scheduled to open in the next few years will be needed.
The company takes the view that global demand may grow by 6.5 percent a year, doubling total consumption by 2020, even if Chinese demand slows down, the FT said.
Alcoa, outside of earnings season really becomes a back burner stock, most of the time a very slow mover, but these days, that sounds inviting when the major indexes jump or fall 1 to 3% on a daily basis. Invest in boring ol' Alcoa -- I'm starting to warm up to the idea and so should you.
Disclaimer: No positions in any of the securities mentioned in this publication.