NEW YORK ( TheStreet) -- With aluminum giant Alcoa (AA - Get Report) due to report first-quarter earnings on Monday, investors are stuck trying to figure out whether the stock is a value play or a trap.This is not an easy question to answer given the state of the aluminum industry, which has been hurt over the past year due to low prices. But that's not to say realizing value is impossible.
Placing a bet on Alcoa here will require patience. But if the company's recent performance serves as indication, investors will be rewarded. The Street is expecting earnings to arrive at 8 cents to 10 cents a share. Meanwhile, revenue is expected to decline slightly to $5.9 billion, down from $6 billion last year. Ordinarily, this would be a concern. But again, this is not a company-specific fundamental problem. Alcoa has overcome low expectations each of the past couple of quarters, despite an 8% revenue decline in the fourth quarter. The issue is with soft production shipments. The company still managed to beat Q4 Street estimates. Likewise, profitability improved significantly. Net income arrived at $242 million, or 21 cents a share -- exceeding the net loss of $191 million, or 18 cents a share in the year-ago period.
What's more, gross margin advanced 4% and the company posted a 200% surge in operating income, aided by the sales of the Tapoco Hydroelectric Project facility, which generated a gain of $161 million after taxes. More than anything else, this type of performance is why the company's management stands out. As I alluded to above, although the aluminum prices may not immediately rebound, the company is still in great hands. In that regard, Klaus Kleinfeld, Alcoa's CEO said: "Alcoa hit record profitability in our mid and downstream businesses, and continued to drive efficiency in our upstream businesses in the fourth quarter, all while cutting debt and maintaining our cash position. We overcame volatile metal prices and global economic instability to deliver on our targets for the fourth year in a row. We enter 2013 in a strong position to maximize profitable growth."