Alcoa (AA), the iconic aluminum smelter, reports their q1 ’14 financial results after the bell tonight.
No longer the Dow icon it was since AA was booted from the Dow in 2013, which perhaps not-so ironically may have marked a long time low for the shares, AA has rallied 63% from it’s early October ’13 low as of earlier this week.
Here is our earnings preview on Alcoa, as published on Seeking Alpha earlier this week.
Also, here is an interview we did on CNBC Asia almost exactly one year ago, saying how we continued to hold Alcoa for clients, given the stock’s price to tangible-book-value.
Note at the end of the interview that the young anchor jumps in, and with all the certainty that the sun rises in the east, calls Alcoa a “value trap”.
In 2006 or 2007 (can’t remember which year), AA printed $3 per share in EPS and traded up to $47. Yes, the world has changed, and I’m still trying to figure out what AA’s true earnings power might be today, versus 10 years ago, but the most important fact about the numbers is that forward EPS estimates have stabilized and that EPS revisions have started to turn higher. That hasn’t been the case for some time, since early 2011.
So far in 2014, the market is “rewarding” commodity names, and value stocks over growth stocks, with AA meeting both criteria. I do think AA could make another run at the Spring, 2011 high of $18.47.
The downstream business should be strong, and the upstream business still an issue, given that AA recently announced the closing of another smelter.
Thanks for reading and looking in.
Trinity Asset Management, Inc. by:
Brian Gilmartin, CFA
Portfolio manager