Alcoa’s Q4 2016 Earnings Preview: Higher Aluminum Prices And Lower Cost Operations To Boost Results

January 23rd, 2017 by Trefis Team
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Alcoa

Alcoa Corporation (NYSE:AA), the successor company comprising the upstream operations of the undivided Alcoa, is set to announce its Q4 2016 earnings results on January 24. [1] This earnings release will be the company’s first as a standalone company. We will be looking out for the company’s year end financial statements in order to build our own model for its stock price. In this article, we will briefly touch upon the major factors that will influence the company’s results.

Aluminum Prices 2016

Alcoa Corporation’s Q4 results and its operations going forward will benefit from a revival in aluminum prices. As illustrated by the chart shown above, aluminum prices have risen steadily over the course of 2016. The increase in aluminum prices over the course of the last year was driven by global production curtailments in response to an extended period of weakness in prices of the commodity. [2] In addition to the improved pricing environment, Alcoa’s results will also benefit from a reduction in the average costs of the company’s aluminum and alumina operations, as illustrated by the tables shown below (the average cost metric reported by the company is a measure that captures all production related costs). Alcoa has shut down high-cost production capacity in both its alumina and aluminum business segments over the past few years, which has helped lower average production costs. The following tables summarize the major factors that will influence the company’s results.

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AA Q4 2016 Earnings Preview

Have more questions about Alcoa? See the links below.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Alcoa

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Notes:
  1. Alcoa To Announce Fourth Quarter And Year-End 2016 Results And Host Webcast, Alcoa News Release [↩]
  2. Global aluminum production is falling, but for how long, Reuters [↩]