Why Did Alcoa Stock Lose 4% After-Hours?

Alcoa Corporation (NYSE: AA) has impressed investors with better-than-expected earnings for the first quarter of 2022. However, a revenue miss and lackluster outlook for the year seem to have spoiled investors’ mood.

Shares of this $16-billion metals & mining company declined 4.4% on Wednesday to close at $86.93.

Quarterly Highlights

Alcoa’s adjusted earnings of $3.06 per share in the quarter exceeded the consensus estimate of $2.77 per share by 10.5%. The bottom line grew 287.3% year-over-year driven by solid growth in aluminum prices, and lower costs and expenses.

Revenues in the quarter stood at $3.29 billion, below the consensus estimate of $3.41 billion. On a year-over-year basis, the top line grew 14.7% on the back of a healthy aluminum business.

On a segmental basis, Aluminum sales at $2,388 million reflected year-over-year growth of 16.7%. Production was down 9.1%, and shipments declined 23.7%. The adverse impacts of production and shipments decline were more than offset by a 67.2% increase in prices.

Bauxite sales were $43 million, down 25.9% from the year-ago quarter. Its production decreased 7.6% year-over-year, and shipments were down 46.7%. For Alumina, sales grew 12.5% from the year-ago quarter to $855 million. Production and shipments declined 3.5% and 7.9% year-over-year, respectively. Prices were up 21.8% from the year-ago quarter.

The cost of goods sold decreased 4.8% to $2.18 billion, and operating expenses were down 10.2% to $0.05 million. Aided by higher revenues and lower costs, adjusted earnings before interest, taxes, depreciation, and amortization increased 105.8% year-over-year to $1.07 billion.

Exiting the quarter, Alcoa’s cash and cash equivalents were $1.55 billion, down 14.3% from the 2021-end, and its long-term debts were $1.73 billion, roughly stable from the previous quarter. Cash generated from operating activities was $34 million, and capital expenditures stood at $74 million.

Projections

Alcoa anticipates bauxite shipments to be within the 46-47 million dry metric tons range in 2022. The projection is 2 million dry metric tons below the previous forecast and reflects the impact of exit from Russian bauxite operations.

Aluminum shipments are expected to be within 2.5-2.6 million metric tons. Further, alumina shipments are anticipated to be 14.2-14.4 million metric tons.

For the second quarter, prices and shipments for both alumina and aluminum are predicted to increase sequentially. These positives are expected to offset the impacts of higher raw material and energy costs.

Official Comments

The company’s President and CEO, Roy Harvey, said, “In volatile markets influenced by world events, we have effectively managed our supply chain and maintained stability across our operations. We remain focused on the future through the pursuit of our strategic priorities and the development of our breakthrough technologies.”

Capital Deployment

During the quarter, Alcoa distributed dividends of $18 million and repurchased shares worth $75 million.

Wall Streets’ Take

Recently, Lucas Pipes of B. Riley Financial maintained a Neutral rating on Alcoa while increasing the price target to $91 (4.68% upside potential) from $55 driven by “continued strength in aluminum pricing.”

Overall, the Street has a Moderate Buy consensus rating on Alcoa based on seven Buys and four Holds. Alcoa’s average price forecast of $95.45 suggests 9.8% upside potential from current levels. Over the past year, shares of Alcoa have grown 153.7%.

Bloggers’ Stance

Per TipRanks data, the financial blogger opinions are 93% Bullish on AA, compared with the sector average of 79%.

Conclusion

Solid aluminum and alumina businesses have boosted Alcoa’s growth prospects. Exit from Russian bauxite operations is forecast to work in the best interest of the company but at the cost of near-term headwinds.

Overall, Alcoa may look attractive to investors with a long-term vision.

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