At the time, as before 2013, the aluminum manufacturer Alcoa (NYSE:AA) has made financial headlines every quarter as the first component of the Dow Jones to report earnings. In some ways, this served as an indicator of what investors could expect each earnings season. I was a financial journalist for the first decade of the 2000s and I remember the anticipation of the Alcoa report every three months.

But things are changing. Industries move in and out of importance, and Alcoa was kicked out of the Dow Jones and replaced by Nike (NYSE: NKE) (yes, that was a silly little pun on clothes). The sportswear maker remains a component of Dow to this day.

The move made sense, as it turned out. Alcoa isn’t even a large cap anymore, and as such is tracked in the S&P 400 midcap index, rather than the large cap S&P 500.

Alcoa’s vertically integrated operations include alumina refining and bauxite mining, in addition to primary aluminum manufacturing. It is the world’s largest producer of bauxite, which is used to produce aluminum, as well as other industrial products such as chemicals and cement.

As you might expect, Alcoa’s revenues and profits are closely tied to the current prices of raw materials in its supply chain.

So how is the company doing, in an era of supply chain disruptions and high commodity prices?

Alcoa announced its second quarter on July 20, and shares jumped 6.36% that week as the company topped earnings views, as you can see on the earnings data page from MarketBeat.


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Diluted earnings per share of $2.95 beat Wall Street expectations. Non-GAAP earnings were $2.67 per share.

Highlights of the report included:

  • Revenue increased sequentially to $3.6 billion, primarily due to improved shipments and higher pricing
  • Net income increased sequentially to $549 million, or $2.95 per share
  • Adjusted net earnings of $496 million, or $2.67 per share
  • Cash balance of $1.6 billion at the end of the quarter
  • Solid cash flow; increased capital returns with $275 million in common shares repurchased and $19 million in cash dividends
  • Enhanced corporate revolving credit facility with terms that provide more flexibility to execute Alcoa’s strategies

The company also said outbound transportation logistics improved in the second quarter, with greater availability of railcars and vessels, positively impacting alumina and aluminum shipments.

Additional share buybacks

“We had a strong first half of 2022 with nearly $2 billion in adjusted EBITDA and free cash flow which enabled more repurchases under our existing share buyback program as well as continued payouts. quarterly dividends,” said Roy Harvey, President and CEO of Alcoa. “We have returned more than $380 million this year to our investors, and today announced an additional $500 million in authorization for future share buybacks.”

The company’s 12-month dividend yield is 0.81%, which isn’t exactly in the dividend aristocrat category. However, its redemption yield stands at 5.62%, for a total shareholder return of 6.43%. That’s not a bad return, and it could be an incentive for investors during a time of great uncertainty in the market and the economy.

In a refrain common to all industries, the company said that on July 1, it partially curtailed operations at an Indiana foundry “due to operational issues, which stem from labor shortages. In the region”.

Does Wall Street see the rise?

So what does Wall Street think of Alcoa’s future? According to analyst data from MarketBeat, there is a “holding” rating on the stock, with a price target of $78.64. That’s up 65.48%, which seems like a pretty good gain for a stock that’s considered a “hold.”

If you’re looking for unique stocks to add to your portfolio, avoid turning to old-school sentimental favorites like old Dow components. That doesn’t mean Alcoa can’t be a winner in your portfolio at some point, but Alcoa is currently mired in a correction, down 16.45% year-to-date. It also shows declines in the shorter-term rolling time frames.

For that reason, this stock probably shouldn’t be at the top of a “buy” list right now, but since it will eventually go up (and it will, especially when the market rebounds), it could be a candidate from the watch list.
Is Alcoa a buyer after strong second quarter results?

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