Can Alcoa’s Q4 Earnings Rebound After a Dismal 2015?

Photo Credit:Louis Vest

Alcoa, Inc. (AA) Materials - Materials & Mining | Reports January 11, After Market Closes

Key Takeaways

• The Estimize community expects revenue of $5.354 billion and EPS of $0.06
• Alcoa has fallen victim to headwinds in China, pushing material prices down
• To position itself for 2016, Alcoa announced it will be splitting up into two separate entities
• What are you expecting for AA? Get your estimate in here!

It’s two weeks into 2016, and the unofficial kick off to earnings season draws near when Alcoa reports Q4 2015 earnings this Monday, January 11th. After a dismal year for shareholders, Alcoa is hoping to leave the blunders of 2015 behind as it embarks on the new year. Over the course of 2015, Alcoa remarkably performed worse quarter over quarter with share prices plunging 37.8%. Unfortunately,  the aluminum company is poised for another disappointing quarter as they begin to shift resources to a corporate restructure. The Estimize community expects revenue of $5.354 billion and EPS of $0.06, slightly higher than Wall Street’s estimates. Compared to Q4 2014, this represents a YoY decline in revenue and EPS of 15% and 82% , respectively. At the moment, the state of U.S. industry is at the mercy of China which accounts for a majority of metals production and exports in the world. Alcoa has fallen victim to economic headwinds in China and is unfortunately expected to close the biggest active aluminum smelter in the U.S. That being said, Alcoa is planning to split itself up into two companies to preserve the profitability of its value-adding operations.

This past year was not kind to Alcoa. Plunging metal prices not only impacted earnings and share prices but led to extensive layoffs throughout the company . Despite a bleak 2015, Alcoa has potential to create significant value in the new year. After years of building up its value-added and upstream operations, Alcoa believes the two have the strength to run as stand alone entities. By 2016, Alcoa is expected to operate as two separate publicly traded companies. The upstream component will continue to produce materials like aluminum while the value-added piece will continue to make things that use upstream materials like engine parts. By eliminating vertical integration, the value-added business will benefit from cheaper metals elsewhere. While the aluminum industry has struggled throughout 2015, the transformation of Alcoa into two entities may be conducive to high performance in 2016.