Earnings season off to a superb start
With Alcoa's outlook so telling, we can be grateful the aluminum giant kicked things off.
Thank heaven earnings season kicks off with Alcoa (AA). That's the first time I have said that in four years, and it's pretty monumental when you think about it.
I have always held that Alcoa's outlook is perhaps the most important one offered by any company, and in this case it's for accelerating worldwide growth -- specifically, 7% going to 8%. It also issued a global aluminum forecast of 7%, a nice pick-up from the 6% I expected, which was last year's number.
How is that possible in a world where growth is not so hot in the U.S., while Europe is actually dropping again? The answer, simply, is China. A gigantic acceleration is going on in that country, according to CEO Klaus Kleinfeld, with potential now for a return to double-digit growth of 11%. That's up significantly from the high-single-digit growth we've been seeing, and from what most had been expecting. This is coming from solid demand in aerospace, in infrastructure, in trucks and in autos, specifically in sport-utility vehicles.
This is tremendous news for those of you trying to figure out what 2013 looks like, and it falls right in the hands of the Chinese government, which Kleinfeld credits for turning on the jets in the fourth quarter.
But it isn't all China. Russia, Brazil and India have begun to reaccelerate, as well. That, plus steady, albeit slow growth in the U.S., and a slowing in the rate of decline in Europe, is also included in the worldwide acceleration. Put simply, Europe can't drag down the world as fast as China is pulling it up.
Where Alcoa's projections are most encouraging are in the line-by-line items of each product. Also quite positive is the potential for climbs in alumina and aluminum, the base products, because of tightening worldwide inventories.
Specifically, Alcoa sees aerospace and automotive demand strengthening. It expects slower levels than what we saw last year, but the magnitude of last year's increase makes it difficult to foresee an even bigger ramp in 2013.
Aerospace growth is expected to be about 9% to 10%, down from the prior 13% to 14%. But it is rooted in 8,900 orders for large aircraft, as well as in good gains in regional jets and business jets.
Kleinfeld sees U.S. auto production going from 15.5 million to 16 million, almost back almost to pre-recession levels. In China, he expects auto sales to grow at 7% to 10%, up from 6% to 7% last year. That is most encouraging.
Heavy trucks, giant users of aluminum, will be down 15% to 19%. But, again, that's a decline in the rate of decline -- something that's so important to include in any calculation. Last year, it sank 15%. One look at Europe, where production will be down to about 6% to 10%, instead of last year's decline of 12%, tells the story. China is going to see a dramatic re-acceleration in truck growth, perhaps to as much as 12% to 19%.
Put it all together, and you see a world in resurgence, with aluminum part of that resurgence -- tremendous news for worldwide economics.
Of course, this is terrific news for Alcoa, too. It's enjoying great gains in free cash flow, including a decline in energy costs and an increase in productivity -- quite a repudiation of a now-questionable review by Moody's, especially when you see cash building and debt declining.
To me, this is an inflection point -- the long-awaited inflection point for both the commodity and Alcoa itself. It cheered me, and it should cheer you. It's a very strong start to earnings season from a company that has a very good handle on the global economy and all of its attendant segments.
Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and has no positions in stocks mentioned.
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I'm still very interested in the retailer earnings, to me it will give a better idea of the health of the consumer which is such a huge part of the economy. I am still curious about online sales and just how much they have eaten away at brick and mortar stores.
This makes me wonder if this trend is good or bad for the economy and the jobs market. Assuming the move to online sales will continue at a similar pace the question is how long before stores close in favor of online only sales? What is the net effect of this? There would be far fewer retail jobs but would the increase in transportation jobs and the infrastructure for both the transport fleet and web site management, would these jobs offset the loss in retail jobs? It would appear many lower paying jobs would get replaced with fewer higher paying jobs.
This is also the trend as advanced manufacturing seems to be coming back to North America. You don't have huge assembly lines of workers turning screws and such but fewer workers who are highly trained and educated programming automated assembly lines, looking to maximize the efficiency of the process. The future is interesting indeed.
aluminum's big competitor in all the industries you noted is PLASTIC. it's been noted in the various engineering trade magazines i get.
seeing how many former USA plastic suppliers are now owned overseas (dupont went to dubai 5 or 6 years ago) i'd suggest the big earnings will likely not be in aluminum.
aerospace (aircraft) and automotive are all pushing for still more use of renewable plastics and composites. lighter, stronger for their size, cheaper to produce with modern tooling.......
Cramer continue to feed us your Handlers CRAP ! You are BRAIN DEAD if you think we are going to believe your BULL "S"
Steve look into your 401's choices....Think recovery type Funds, or maybe even balanced Energy's.
Some have more options then others, and most times you can "self direct" those choices...??
But good luck in what ever you do, anyway....
VOX........The time to buy Ford was when it was in the 8s to 10s....Had some relatives/friends that I think even got in around $5-6 ??.....That convinced me when I got in at around the above prices.
(They had worked in the Auto business)
Now it's a 30-40% gainer, increasing their dividends back..Today is a nice day with a $1000 dollar gain and divs coming in a couple of months again...And no "bailout stigma." like DLH said...Kudos,yes.
Gold is even doing better.....It's a great day, out here in the boonies
When are many going to accept, that yes much is about China...And not all about the U.S.
And certainly not as much about Europe, particularily Greece..
With good earnings rolling out, it "could spell better recovery" and maybe even expansion...??
I am not about "how" a Corporation makes money, We only care that "they do."
The rest will eventually fall into place....And that's where I place the bets..
Not all Companies are in Great shape, but some are doing pretty good; those are the bets.
Like Ford(F) doubling their dividend this morning,(first in 6-7 years) and rising about 3%..
We had major positions in them, MY Question....Did YOU ??
Gold, coal and oil all rising substancially.......Did YOU ??
I say it's "all about" believing and all about investing, those sitting on the sidelines bemoaning about corrections and downturns...Are just trying to make themselves feel better....
They are not looking for the next "best soft ice cream" or "sliced bread" ?
Nor any "diamonds in the rough."..........
They only want "soured milk" and "burnt toast." They get their nuts off, on it.....
Retailers are a funny bunch, but don't think they are going out of biz...
Target has had a recent pullback and Walgreens is recoverying and going great...
Home Improvement is rolling right along....
There are many others, you only have to choose your poison....Or your "sweet juice."
And some of them pay a decent a decent dividend, maybe a good place to park cash...?
Some are "pricey" right now...
But make your plays on a stronger recovery...IMO
America's Spring is coming, forget about the Arab's.
Steve....I agree about plastics, and I have invested in Chemical Companies, that had great involvement in the past, supplying what it took...None today..
"Plastics" was the magic word that came out of the Movie: "The Graduate" with Dustin Hoffman and Ann Bancroft in the 60s..Great movie, except we had seats in the "front" with 4 of our friends...
One of our kids worked a summer/fall at an injection maker..
There were several even dozens of companies around, only a couple or a handful exist today.
Many were tied to Automotive Industry and Durable(appliance) goods manufacturing...
Today I'm sure much of that business that is left, has moved offshore...Most were very boring jobs.
My wife did business with a few of them, selling the products that her company produced.
Aluminum is used a lot more in heavy industry today, including Automobiles,planes and such.
I remember having to replace a casting on the front of one of our tractors, 85 hp. that had cracked or actually got broken by one of kids...$4700 dollars new, luckily I got a used one for $1800.
I think plastic is a dying commodity today, except for simple applications, more fibered compounds of different sorts are being used, carbonized and other wierd stuff..
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