Global aluminium giant Alcoa will release its Q2 earnings report after the markets close today. This is the unofficial start to earnings season, which is when hundreds of big companies tell us what’s going on with their businesses.
Analysts expect the company to announce earnings of $0.06 per share, which is what it earned a year ago.
aluminium demand is very sensitive to economic activity, so Alcoa is widely considered a bellwether.
And if history is our guide, Alcoa earnings announcement may be able to tell us what the next three months will look like in the stock market, according to Factset’s John Butters:
In the 21 quarters that Alcoa reported actual EPS below the mean EPS estimate, the average price change from report date to report date is -0.5%. However, the price of the index decreased in only 11 of these 21 quarters (52%). During the other 10 quarters, the price of the index increased over the next three months after Alcoa missed estimates.
“Recent history shows that when Alcoa has beat estimates, the price of the index has increased about 80% of the time over the next three months,” Butters writes. “When Alcoa has missed estimates, the price of the index has actually increased nearly as often as it has decreased over the next three months.”
Still, a dissonant aluminium market might mean that Alcoa no longer enjoys its bellwether status. Investors may parse Alcoa’s report for its comments on market overall, as low-cost aluminium smelters in China continue to drive growth in the country’s share of global production.
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