Dissecting Alcoa Stock's Potential to Extend Its Run Higher

AA will reports Q3 results on October 14

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Alcoa Corporation (NYSE:AA) is an American industrial corporation. AA is the world's eighth-largest producer of aluminum, with corporate headquarters in Pittsburgh, Pennsylvania. Alcoa conducts operations in 10 countries. It is a major producer of primary aluminum, fabricated aluminum, and alumina combined, through its participation in the technology, mining, refining, smelting, fabricating, and recycling industries. This afternoon, AA closed at $51.56.

Last week Alcoa Corporation announced plans to release its third-quarter results after the U.S. markets close on Thursday, October 14. As for AA's last quarterly report, the aluminum brand produced its highest-ever profitability and earnings per share in Q2 of 2021. Wall Street analysts have Alcoa's EPS coming in at $1.66 for its upcoming Q3 earnings report.

Alcoa has outperformed earnings expectations across the board on all four of its most recent earnings reports released. For Q3 of 2020, AA beat analysts’ estimates by a margin of $0.21, reporting an EPS of -$1.17. For Q4 of 2020, Alcoa's EPS increased to $0.26, beating expectations by a margin of $0.15. For Q1 of 2021, AA posted another increase in earnings, rising to $0.79 per share and beating estimates by a margin of $0.33. For Q2 of 2021, Alcoa reported an EPS of $1.49 and beat expectations by a margin of $0.12.

Alcoa stock has increased 320% in price year-over-year and AA is up 369% since bottoming at a 52-week low of $10.98 in September of 2020. Additionally, shares of AA have grown 109% year-to-date and Alcoa stock is currently down just 0.6% from a three-year high of $51.89 just reached on Sept. 15.

Fundamentally, Alcoa Corporation has experienced irregular long-term revenue and net income growth. Analysts are leaning bullish, though there still remains room for upgrades, with three brokerages sporting a tepid "hold" recommendation. Overall, Alcoa stock remains an intriguing recovery play taking into account AA's forward price-earnings ratio of 8.20. 

Lastly, Alcoa stock's Schaeffer's Volatility Scorecard (SVS) stands at 83 out of a possible 100. This implies the stock tends to outperform these volatility expectations -- a good thing for buyers. 

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