Alcoa’s Earnings Fall Short

Alcoa ($AA) kicked off earnings season after the close yesterday when it reported Q2 earnings of 32 cents per share. Although that more than doubled last year’s result, it was a penny shy of Wall Street’s forecast. What’s most troubling is that Wall Street’s forecasts had been drifting lower over the past several weeks, and Alcoa still fell short.

This may be a harbinger of a weaker-than-expected earnings season. So far, Alcoa’s stock is holding up in today’s market (it’s basically unchanged). The problem in looking at the earnings trend of a company like Alcoa is that so much of the business is tied to the direction of aluminum prices.

Alcoa isn’t representative of the broader economy. Companies like UPS ($UPS) are much better for that kind of analysis. But Alcoa’s weakness could point to weakness in other cyclical stocks.

Here’s a look at the trend in the S&P 500’s earnings. In the second quarter of 2007, the S&P 500 earned $24.06 which was its all-time peak. For Q2 of 2011, Wall Street expects $24.12 which will be a new record. (Note: The S&P 500 lost $0.09 in Q4 of 2008.)

Posted by on July 12th, 2011 at 10:56 am


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