Alcoa (AA) unofficially kicks off the earnings season for the last quarter of 2014, reporting earnings on Monday after the market closes.
The name “Alcoa” still conjures up an image of aluminum smelters and smokestacks for many, says Morningstar analyst Andrew Lane. But actually, the company’s products are more diverse, value-added and cutting-edge than basic aluminum sent on to other manufacturers to be made into consumer goods and industrial equipment.
For instance, Alcoa aluminum goes into the new, all-aluminum Ford F-150 pickup truck as well as lightweight heat-tolerant aerospace components.
“We have a very positive outlook for Alcoa’s earnings for the past quarter and over the next couple years,” says Lane. He adds that Alcoa has expanded into global markets and multiple industrial sectors in recent years through major strategic acquisitions.
Lane points out that low oil prices are helping Alcoa, because the aluminum-fabrication is so energy-intensive. But low gas prices for consumers may be a counterweight: “The use of aluminum materially improves fuel efficiency. But given the steep decline in oil prices for the consumer at the pump, an all-aluminum vehicle is obviously going to have a less attractive value proposition.”