It’s been a bad year for aluminum producer Alcoa Inc (NYSE:AA)‘s stock.
Shares of this member of the Dow Jones Industrial Average (INDEXDJX:.DJI) have plunged more than 8% since the start of 2013, and current worldwide trends aren’t giving investors anything to feel optimistic about. Now with earnings season coming around again, analysts everywhere have a chance to see just how Alcoa Inc (NYSE:AA)’s managing the tough times in the industrial sector.
With the numbers in the books, did Alcoa Inc (NYSE:AA) live up to expectations?
Hits and misses
First, the news: Analysts had projected earnings per share of $0.10 for the struggling company, and Alcoa Inc (NYSE:AA) managed to beat that number by a hair. The company reported $0.13 in EPS — $149 million in net income — for the first quarter; even without one-time items, Alcoa Inc (NYSE:AA) still beat expectations by a cent, with an EPS result of $0.11. That’s a year-over-year gain of $0.01, compared with last year’s $0.10 adjusted EPS mark.
Unfortunately, the company’s revenue didn’t make the grade in the first quarter. Alcoa Inc (NYSE:AA) reported revenue of $5.8 billion, just missing analyst projections of $5.9 billion. That mark fell 3% year over year, a casualty of a weak aluminum market that hasn’t managed to find its footing in 2013.
Investors haven’t liked what they’ve seen so far: In after-hours trading, Alcoa’s stock has fallen more than 1%. So which story should you buy — or sell? Is Alcoa slipping and sliding with its falling revenue, or is it slowly digging itself out of the hole made by the sluggish global economy?
What’s bad, what’s good
Make no mistake: Alcoa’s still facing plenty of trouble. Commodity prices across the mining and metals sector have beaten a hasty retreat in the recent past. Alcoa’s hardly been the only company affected. Among fellow aluminum producers alone, rivals Rio Tinto plc (ADR) (NYSE:RIO) and BHP Billiton Limited (ADR) (NYSE:BBL) have felt the blow of depressed prices. The latter’s revenue dove by 14% in the last half of 2012 as low commodity prices took a bite out of sales; Rio Tinto plc (ADR) (NYSE:RIO)’s desperately trying to slash costs after recording a full-year loss.
Prices were mainly responsible for Alcoa’s dipping revenue today, although the company’s reduced production in Europe didn’t help. That latter point is a good thing for Alcoa’s long-term future, however: With growth so stagnant in Europe, continuing to commit resources to a pointless expenditure would only drag on tomorrow’s earnings. Better to bite the bullet today and hope more promising markets pay off, such as if China emerges from its recent slowdown and picks up infrastructure spending.