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Omar Venerio
Omar Venerio
Articles (1736) 

Thursday Morning Market Highlights

Markets mixed, shares of Alcoa down on financial results

US Markets

U.S. stocks were mixed on Thursday morning following Joe Biden's inauguration as the 46th President of the United States. The Dow fell 0.05% to 31,171, the S&P 500 index slid 0.02% to 3,851 and the Nasdaq Composite Index was up 0.16% to 13,478.

Gainers

• The Travelers Companies, Inc. (NYSE:TRV) +3.8%

• D.R. Horton, Inc. (NYSE:DHI) +3.3%

• Lennar Corporation (NYSE:LEN) +3.2%

• Ford Motor Co (NYSE:F) +3.2%

Losers

• United Airlines Holdings, Inc. (NASDAQ:UAL) -5.7%

• Molson Coors Beverage Co (NYSE:TAP) -1.8%

• Invesco Ltd (NYSE:IVZ) -1.4%

• Carmax Inc (NYSE:KMX) -1.1%

Global Markets

The main European stock markets were mixed. The U.K.'s FTSE 100 gained 0.02%, Germany's Dax advanced 0.04%, France's CAC 40 slid 0.33% and Spain's Ibex 35 retreated 0.05%.

In Asia, Japan's Nikkei 225 fell 0.38%, India's BSE Sensex gained 0.80%, Hong Kong's Hang Seng rise1.08% and China's Shanghai Composite was up 0.47%.

Alcoa releases earnings report

Shares of Alcoa Corporation (NYSE:AA) fell more than 6% on Thursday morning after the company announced financial results for its fourth quarter of fiscal 2020. It posted earnings per share of 26 cents, beating analysts' estimates by 19 cents, on revenue of $2.39 billion, which declined 2.0% year-over-year and beat expectations by $20 million.

CEO Roy Harvey had the following to say:

"We had a very solid fourth quarter, and the work we accomplished in 2020 positions us well to capture the benefits of an improved market… The performance of employees across Alcoa, even throughout these unprecedented times, shows that our strategies are bringing positive results across the business," Harvey said. "As we progress into this new year, we will focus first on keeping our employees safe as we continue to execute on our strategy, including leveraging our industry-leading practices for a world that is demanding sustainable solutions that we are uniquely qualified to provide."

Revenue growth was attributed to higher aluminum prices despite lower alumina and aluminum shipments. Alcoa achieved a 15% sequential increase in sales revenue, almost all explained by the increase in volume from the automotive sector. However, total revenue declined 11% in 2020 to $9.3 billion.

Further, the adjusted Ebitda was $361 million, a 27% sequential increase due to higher aluminum and alumina prices.

Looking at cash generation, the company's cash from operations was $38 million, the cash for financing activities was $63 million and cash used for investing activities was $117 million. However, the free cash flow was in the red at -$73 million.

Looking ahead to 2021, the company expects aluminum consumption to increase around the globe.

The stock has lost more than 10.5% so far this year versus the S&P 500's gain of 2.6%.

At the end of September, Donald Smith boosted his investment in the company by 1% to 1,527,514 shares and Barrow, Hanley, Mewhinney & Strauss opened a new position with 18,695 shares. Ken Fisher (Trades, Portfolio) almost doubled his position in the stock to 6,695,548 shares. Joel Greenblatt (Trades, Portfolio) reduced his holding by 31% to 118,556 shares.

Disclosure: The author holds no positions in any stocks mentioned.

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About the author:

Omar Venerio
Omar Venerio is a capital markets, derivatives, corporate finance and financial management professor and Area Head of Finance. He is passionate about the stock market and providing independent fundamental research and hedge fund and insider trading-focused investigation.

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