What To Expect From Alcoa’s Q1 ’18 Results

by Trefis Team
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Alcoa Corp (NYSE: AA) will release its Q1 2017 results and conduct a conference call with analysts on April 18.  We expect the White House’s new protectionist trade policy to likely benefit Alcoa through better average price realization for its commodity offerings in the short-run. Shipment volume is expected to remain low in the first half of the year, with stronger results expected over the second half. We have outlined our expectation from the company’s results for 2018 in our interactive dashboard which will be updated based on actual Q1 results.

Production Volume Is Expected To Remain Rangebound At 2017 Level

The company’s 2018 production guidance reflects stagnant growth in its shipment volume for both alumina and bauxite. Additionally, Alcoa’s aluminum output is expected to see a modest decline in 2018 primarily due to the curtailment of its Aluminerie de Bécancour Inc. (ABI) smelter. The first quarter is expected to display the lowest shipment volume due to fewer days in the quarter and scheduled maintenance, which is expected to create a $40 million sequential headwind.

Alcoa Likely To Benefit From Recently Imposed U.S. Tariffs and Trade Sanctions

With the recent tariff imposition on aluminum imports in the U.S. and even larger sanctions on a Russian rival, the U.S. aluminum industry is expected to experience a surge in aluminum prices in the short-run due to a shift in the country’s demand from exports to locally produced aluminum. This is expected to provide a significant surge to Alcoa’s revenue in the short-run. However, the long-run implication of such sanctions might prove to be detrimental to the U.S. aluminum industry as a whole. Alcoa expects China’s aluminum demand to grow by 5.75-6.25% year-on-year (y-o-y) in 2018, compared to a global growth (ex-china) expectation of  3.25-3.75% y-o-y. Thus, a plausible trade war between China and the U.S. could lead to the U.S. aluminum producers not able to fully benefit from the rising demand from the East Asian country.

The company has a consensus market adj- EPS estimate of $0.70 and a revenue estimate of $3.09 billion, for the first quarter, reflecting an 11% and 16% y-o-y growth, respectively. Overall the company is expected to have a moderate first quarter with stronger results in the later part of the year. In case you have a different outlook on the company, you can make changes to our estimates and use our dashboard to arrive at your own fair price estimate for the company.


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