AA: The Opening Pitch of Earnings Season

NEW YORK (TheStreet) -- I for one am looking forward to the start of another earnings season. As usual, Alcoa (AA) kicks off another summer earnings season. Wall Street and retail investors are waiting to see if Alcoa can pull off another beat like last quarter. In the quarter ending in March, Alcoa's mean estimate was for a loss of about 4 cents.

Alcoa exploded higher after reporting, but has since given it all back and more. Alcoa is the world's leading producer and manager of primary aluminum, fabricated aluminum and alumina facilities, and is active in all major aspects of the industry. The company was founded in 1888 and trades an average of 21.3 million shares per day with a marketcap of $9.3 billion.

Alcoa is anticipated to report soft second-quarter earnings after the market closes on July 9. The consensus estimate is currently 7 cents a share, a decline of 25 cents (78.1%) from 32 cents during the same period last year. Currently, the total number of analysts buy recommendations is seven, and six recommending a hold. The average analyst target price for AA is $11.39, an increase of over 30%.

Weinstein estimate: Lower revenue and 4 or 5 cents in earnings per share. I expect lower revenue mitigated by lower energy and raw material costs.

Alcoa hasn't appreciated much since 2009, so I would not expect heavy selling as we approach 2013 like I do with many stocks. Higher capital gains taxes will increasingly apply headwinds on companies like Alcoa.

The trailing 12-month price-to-earnings ratio is 16.5, which is on the high end for a company not growing as fast as many others with even lower earnings multiples. The mean fiscal year estimate price-to-earnings ratio is 17.5, based on earnings of 50 cents per share this year. Investors are receiving 12 cents in dividends for a yield of 1.37%.

In the last month the stock has moved in price 5.42%, but all the major trend lines are moving from the top left to the bottom right; not a good sign. Comparisons include Freeport McMoRan ( FCX), U.S. Steel ( X), Arcelor Mittal ( MIT), Nucor ( NUE) and Southern Copper ( SCCO).

Nucor and Freeport McMoRan are performing the best from 2009. The others are largely rewarding investors with dividends and not much else. TheStreet included Alcoa as Monday's featured metals and mining loser.

The company has rising revenue year-over-year of $21.01 billion last fiscal year compared to $18.44 billion in the previous year. The bottom line has rising earnings year-over-year of $254.00 million last fiscal year compared to $-1.15 billion in the previous year.

Short interest is high for such a relatively large company. In the last short interest report, 7.6% of the float was shorted. On June 15, the reported number of shares short was 17.4 million, the largest amount reported in the last year.

Short sellers are the smart money and when they start ramping up aggressiveness it pays to keep your eye on what they are doing. Alcoa hasn't moved the needle much since the depths of 2008-09. I consider it a failure to still trade under $9 a share. It's the same reason why I estimate earnings to come in lower than the mean estimate.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

At the time of publication, the author held no positions in any of the stocks mentioned.

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