Spotlight: Alcoa

It is that time of year again: the third quarterly results are dripping in. Alcoa (NYSE:AA) is traditionally one of the companies that kicks off this exciting period. The results Alcoa showed were better than the market had anticipated. Alcoa, a manufacturer and distributor of aluminum and aluminum goods, noted higher profits and lower costs. The higher profits are partly due to the better aluminum market, since the aluminum prices have risen and Alcoa was able to sell its products at a higher price. On the other hand, Alcoa is reforming their business, resulting in lower costs. Leading to a better performance of Alcoa. Interestingly, Alcoa is still busy reforming and cutting costs, so we may expect costs to decline even further in quarter four. The outlook for Alcoa is therefore positive and earnings per share are expected to grow from $0.20 to $0.25. However, there is also a threat to Alcoa's cash flow: the aluminum future market. Where the aluminum market in the third quarter positively influenced Alcoa's results, the aluminum price may hurt Alcoa's results in the fourth quarter. We notice a sharp fall in the aluminum price in September ($2100 to $1900), if this trend continues the cash flow projections of Alcoa may be overstated. Dividends may also influence your decision of buying Alcoa stock. Alcoa has been paying dividends even when they made a loss. Of course, Alcoa has also been affected by the financial crisis, causing them to cut back on dividends since 2009 ($0.03 per stock since 2009 compared to $0.17 before 2009). Now that Alcoa is reporting increasing profits, Alcoa may decide to update its dividend and start paying more than the previous $0.03. Based on the third quarterly results, we see that Alcoa's profits are increasing and with the possible option of higher dividends, we expect Alcoa to be ever more profitable for investors.