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Alcoa (AA) to Post Q2 Earnings: Is a Beat in the Cards?

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Alcoa Corporation (AA - Free Report) is set to release second-quarter 2021 results on Jul 15, after market close.

The company’s earnings beat estimates in each of the last four quarters, the positive earnings surprise being 56.78%, on average. In the last reported quarter, Alcoa’s earnings of 79 cents per share beat the Zacks Consensus Estimate of 48 cents by 64.58%.

Zacks Investment Research
Image Source: Zacks Investment Research

In the past three months, the company’s shares have gained 11.7% compared with the industry’s rise of 9.1%.

Factors to Consider

Alcoa is anticipated to have benefited from growth in demand for aluminum and value-add products in the second quarter of 2021. Improvement in shipment volume for smelter grade alumina and aluminium on strong production and higher prices is likely to have augmented top-line performance of its Alumina and Aluminium segments in the quarter. Also, the company’s focus on improving bauxite shipments with higher production might have supported the Bauxite segment’s performance.

The company’s efforts to expand sales of Sustana products with the growth in low carbon aluminum demand are likely to have been beneficial in the quarter. Adoption of the company’s new integrated operating model is also likely to have supported its operational performance.

Its focus on enhancing operational productivity and commercial effectiveness, along with its cost-control measures and technological advancements, is likely to have boosted its margins and profitability in the to-be-reported quarter.

However, lower third-party shipments and weak pricing for bauxite are likely to have adversely impacted the performance of Alcoa’s Bauxite segment. Given the company’s extensive geographic presence, a stronger U.S. dollar might have also hurt its overseas business in second-quarter 2021.

The Zacks Consensus Estimate for Alumina and Aluminum segment’s revenues for the second quarter is currently pegged at $1,059 million and $1,855 million, respectively, indicating 18.7% and 25.6% increase from the year-ago quarter reported numbers. The consensus estimate for revenues from the Bauxite segment is pegged at $252 million, indicating a year-over-year decrease of 19%.

Earnings Whispers

Our proven model predicts an earnings beat for Alcoa this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. This is the case here as elaborated below.

Earnings ESP: The company has an Earnings ESP of +3.10% as the Most Accurate Estimate is pegged at $1.37, higher than the Zacks Consensus Estimate of $1.32.

Alcoa Corp. Price and EPS Surprise

Alcoa Corp. Price and EPS Surprise

Alcoa Corp. price-eps-surprise | Alcoa Corp. Quote

Zacks Rank: Alcoa carries a Zacks Rank #1.

Other Key Picks

Here are some other companies you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this season:

The Middleby Corporation (MIDD - Free Report) has an Earnings ESP of +0.23% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

A. O. Smith Corporation (AOS - Free Report) has an Earnings ESP of +3.53% and a Zacks Rank of 2, at present.

Flowserve Corporation (FLS - Free Report) has an Earnings ESP of +9.76% and a Zacks Rank of 2.