Featured Content

An Important Message from Michael Lombardi:

An Important Message from Michael Lombardi:

I've identified six time-proven indicators that now all point to a stock market crash in 2015. You can see my latest video, Six Time-Proven Indicators Now All Pointing to a 2015 Stock Market Crash, which spells out why we're headed for a crash and what you can do to protect yourself and even profit from it, when you click here now.

Earnings Season Kickoff: What Alcoa’s
Saying About the Market and More

By

earnings seasonAlcoa, Inc. (NYSE/AA) is traditionally the first Dow Jones Industrials stock to report in earnings season. The company is one of the world’s top aluminum makers and hence is a good indicator for the global economies, as the metal is used in many industrial applications, including aircraft, automobiles, commercial transportation, packaging, building and construction, oil and gas, defense, consumer electronics, and industrial.

Alcoa surprised on the upside and raised its global revenue guidance to seven percent for 2012, which suggests the global economies may be better off than previously thought.

But again, Alcoa is only one company; there are 499 S&P 500 companies to come in this earnings season. You should monitor the results from the sellers of luxury goods, which are faring well, as I discussed in Retail Sector Stars: Luxury Stocks Are in Vogue.

The news doesn’t look promising for the first-quarter earnings season, but this could change as it did in the fourth-quarter earnings season as we moved along.

Based on the current estimates, earnings growth is estimated to be 3.2% in the first quarter, following 9.2% growth in the fourth quarter, according to Thomson Reuters. The first-quarter reading tends to be low, but it should move higher as earnings are reported. Earnings growth in the second quarter is estimated at 9.2%.

The two top-performing earnings expected for the first-quarter earnings season are Industrial’s (+10.3%) and Financials (+8.3%). Technology (+16.8%) was the second top gainer in the fourth-quarter earnings season. I still believe technology will remain one of the top areas to make money going forward.

The two weakest areas of earnings growth in the first-quarter earnings season are expected to be similar to the fourth-quarter earnings season, with Telecom (-14.1%) and Materials (-15.6%) representing the losers.

As in the past quarters, the key in my view is whether companies are growing their revenues to drive earnings or the earnings growth is being generated by cost cuts. This is critical and could give us a good indication of how well corporate America is actually doing.

The reality is that many companies cut costs during the recession and should be in better condition now. If the economy were truly healthy, we would see earnings growth driven by revenues. In addition, what the company says about the future is important. Alcoa was upbeat going forward. The area to keep an eye on according to Alcoa is the aerospace sector, where the global demand for aluminum is pegged at 13% to 14%, up three percent. The other areas of growth include automotive (three percent to seven percent), commercial transportation (one percent to five percent), packaging (two percent to three percent), building and construction (2.5% to 3.5%), and industrial gas turbine (one percent to two percent).

The key is to monitor the companies that are global in nature, especially those that produce the raw materials essential to economic renewal, such as copper, energy, iron, forestry and concrete.

As I have said, the key will be revenues going forward, especially organic growth. We want to see revenues grow to drive earnings instead of cost cuts. Without revenues growing, it is difficult to imagine a healthy U.S. economy and I’m concerned this could hamper growth.

Premium Content

Secret "New Swiss Bank Account" Safest Way to 44% Returns

Secret

It's the safest—but, until now, completely ignored—place for your money. Because these elite "bank accounts" pay guaranteed 5% cash payments per annum on top of returns on capital exceeding 44%... Learn all about them here.

About the Author, Browse George Leong's Articles

George Leong is a senior editor at Lombardi Financial. He has been involved in analyzing the stock markets for two decades, employing both fundamental and technical analysis. His overall market timing and trading knowledge are extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi Financial’s popular financial newsletters, including Red-Hot Small-Caps, Lombardi’s Special Situations, Judgment Day Profit Letter, Pennies to Millions, and 100% Letter. He is also the editor-in-chief of a... Read Full Bio »

  • Murat

    the truth is always wlleufoy unreported in the USA propaganda machine. As one of the first people to report on MTBE, a gas additive, I found AP press articles that had false headlines, and totally fabricated quotes in the articles!All to support big oil's position that MTBE was safe. And don't forget the massive lies that brought us to the war in Iraq.

Exclusive profit Confidential Presentation

Stocks that Double in Two Days No Matter What the Market Is Doing?

Stocks that Double in Two Days No Matter What the Market Is Doing?

We picked SafePay Solutions stock and it jumped 142% in two days. We then picked China 3C Group stock and it went up 103% in two days. To learn more about our stocks that double in two days, see them here now.

×