Alcoa, Inc. (NYSE/AA) will be the first Dow Jones Industrials stock to report in the second-quarter earnings season, as it kicks off with its results on July 9. The company is one of the world’s top aluminum makers and a good indicator for the global economy, as the metal is used in many industrial applications, including aircraft, automobiles, commercial transportation, packaging, building and construction, oil and gas, defense, and consumer electronics. In the first quarter, Alcoa had Wall Street rejoicing after surprising on the upside and raising its global revenue guidance to seven percent for 2012. That was then. So far, based on the stagnant stock price and decline from the $10.00 level, the results may not be that good for the second-quarter earnings season, leaving traders nervous.
While there is hope and optimism for the second-quarter earnings season, I expect disappointment, but I could be proven wrong as companies report.
Based on the current estimates, earnings growth for the S&P 500 is estimated to be a decent 6.5% in the second quarter, down from a much more optimistic 9.2% as at April 1, according to Thomson Reuters. In the first-quarter earnings season, 67% of the S&P 500 companies beat estimates, which was a decline from the fourth-quarter earnings season.
The three top-performing earnings growth areas in the first-quarter earnings season were Industrials (+17.6%), Technology (+14.7%), and Financials (+13.6%). I still believe technology will remain one of the top areas to make money going forward, but boring dividend paying stocks also look attractive at this time, as I discussed in “Why the Pros Are Dumping Tech Stocks in Favor of Boring Companies.”