As I write this, shares of Alcoa Inc. (AA) are falling after the aluminum maker reported its operating results for the first quarter. The aluminum producer swung to a profit last quarter, reporting net income of $195 million, compared with a net loss of $178 million in Q1 2014. Excluding special items, adjusted net income was $363 million, or $0.28 per share. This beat analysts’ estimates of $0.26 per share.
However, Alcoa Inc. missed top-line expectations. Compared with Q1 2014, revenues rose just 7% to $5.82 billion. Analysts were looking for revenue of $5.94 billion. The fact is that as a multinational company, Alcoa receives much of its revenue in foreign currencies. And with many of the world’s currencies declining against the dollar, Alcoa is getting less “bang for its buck,” when it converts those international sales back into dollars.
So while Alcoa revised its 2015 outlook (now expecting 9% global aluminum demand growth), its sales and earnings growth is expected to slow over the next several quarters. For FY 2015, it is expected to post just 3.7% sales growth and 15.2% earnings growth.
It’s going to be an uphill battle for Alcoa to maintain its previously rapid growth rate, and investors are finally realizing it. I consider AA a C-rated Hold.
Now that earnings season has officially began, it’s going to be a busy time for company updates. Stay tuned to my daily blog to make sure you’re all caught up.