Commodity Stock Under Pressure: Alcoa Corp (NYSE: AA)

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Alcoa Corp (NYSE: AA) stock fell over 4% on 16th July, 2021 (as of 13:04:39 UTC-4 · USD; Source: Google finance) after the company reported second-quarter earnings that beat analysts’ expectations, with the producer boosting its forecast for aluminum shipments this year as reopening economies lift demand for everything.

The company delivered earnings before interest, taxes, depreciation, and amortization of $618 million, higher than the $599.8 million average of analysts’ estimates compiled by Bloomberg. It is up 19% sequentially and has more than tripled last year’s $185 million. Net income rose due to the relative contribution of the Aluminum segment with modest income taxes and virtually no minority interest, more Aluminum segment EBITDA translates to the bottom line compared to the other segments.

Moreover, at the product segment level, Bauxite adjusted EBITDA fell $18 million due to lower intercompany transfer prices and higher production costs. In Alumina, $22 per ton lower API and higher maintenance and energy costs were only partially offset by improved mix of shipments in contract pricing. The Aluminum segment benefited from much higher LME and higher regional premiums, especially at the Midwest premium as well as stronger value added shipments and pricing while higher production costs, non-recurrence of Warrick rolling mill EBITDA and higher raw materials and energy costs were partial offsets.

AA in the second quarter of FY 21 has reported the adjusted earnings per share of $1.49, beating the analysts’ estimates for the adjusted earnings per share of $1.35, according to Zacks Investment Research. The company had reported the adjusted revenue growth of 32 percent to $2.83 billion in the second quarter of FY 21, beating the analysts’ estimates for revenue of $2.61 billion.

The company expects 2021 aluminum shipments to be in the range of 2.9 million to 3 million tons, up from its earlier forecast of as much as 2.8 million. For full year 2021, shipments are expected to be in the ranges of increasing 100,000 tons in both the Bauxite and Alumina segments, and increasing 200,000 tons in the Aluminum segment. On the income statement, transformation costs are improving $5 million. In cash flows, there are two expected improvements, net pension and OPEB cash funding is projected to be $5 million better and environmental and ARO spending is expected to be $10 million better than the last time. Operations are anticipated to continue performing at a high level. Current Aluminum prices are significantly higher and alumina prices are higher too compared to the second quarter.

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