Market Cheers Alcoa Outlook

The big news yesterday was Alcoa (AA) kicking off the fourth-quarter earnings season.

The aluminum producer posted its first net loss since the first quarter of 2010–blaming uncertainty of the impact of Europe’s debt crisis on the global economy, as well as declining manufacturing activity in China and a steep 12% drop in aluminum prices in the quarter.

The company’s earnings also suffered from higher energy and transportation costs, and although business was down in most areas, overall revenue actually climbed to $6 billion from $5.65 billion year-on-year, largely driven by the company’s aerospace and industrial gas turbine businesses.

Looking forward, Alcoa expects that European sales will remain weak–no surprise there–but the company sees improving demand from China, always a big market for commodities.

Although Wall Street has been treading somewhat cautiously as earnings season gets under way, it appears that Alcoa’s lackluster earnings were already priced into the stock and the market didn’t panic.

As I mentioned yesterday, I downgraded Alcoa to an F-rating a few weeks ago, so these bland earnings were no surprise. Right now, we’re experiencing a flight to quality as investors and position themselves in high-quality stocks in preparation for the earnings season.

Remember that the cream rises to the top, and be prepared with stocks that are currently exhibiting superior fundamentals and solid buying pressure.

More Louis Navellier

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