Alcoa Earnings Are Coming Soon...And UBS Is Above Consensus

Alcoa Inc (NYSE: AA) will kick start the first-quarter earnings season by reporting its quarterly numbers on April 11, and UBS's earnings estimate is above the consensus.

The lightweight metals maker is expected to earn $0.02 a share on revenue of $5.16 billion, which is lower than $0.28 earnings and $5.82 billion sales reported in the same quarter last year.

"Our Q1 EPS estimate of $0.03 is above consensus of $0.02 but below Q4/15 adjusted EPS of $0.04," UBS analyst Matt Murphy wrote in a client note.

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"AA's realized aluminum price is expected to be relatively flat sequentially as LME prices (on the 15-day lagged basis typically realized by AA) were less than 1% higher QoQ while we expect realized alumina prices to decline significantly. Earnings for Arconic (AA's value-add businesses) are expected to be relatively flat YoY," Murphy added.

Murphy expects that Arconic's Q1 will be relatively lackluster, and he will be looking for a meaningful ramp-up in the outlook for the business in Q2–Q4 if AA's 2016 targets are to be achieved.

"We see this ramp-up as important to achieve the planned separation and the re-rating of the value-add business," said Murphy, who expects lower alumina prices (down ~20 percent QoQ) to weigh on upstream earnings in the first quarter.

Murphy has a Buy rating and $11 price target on the shares of Alcoa, which were up 1.23 percent at $9.84.