Why Shares in Alcoa Crashed Today
Shares in bauxite, alumina, and aluminum producer Alcoa (NYSE: AA) were down around 10% by midday Wednesday. The move comes after its steel manufacturing peer, Nucor (NYSE: NUE), announced disappointing guidance for its third quarter. Steel and aluminum are replaceable with each other and operate in very similar end markets, so Nucor's warning is a salutary reminder that Alcoa also faces difficulties in 2022.
Nucor's updated guidance for the third quarter calls for earnings in the range of $6.30 to $6.40 -- somewhat short of the analyst consensus for $7.59. Nucor's management cited "metal margin contraction and reduced shipping volumes particularly at our sheet and plate mills" and said its steel mills earnings would be "considerably lower" on a sequential basis. Management also said its raw materials earnings would be flat on a sequential basis, after previously forecasting an improvement.
In a sense, the move is hardly surprising. Steel reinforcing bar and hot-rolled coil steel prices have been on a downward trend since the spring, and the price of aluminum has been in step. As such, Nucor's warning is a strong indication that earnings estimates for Alcoa need to be reduced.
Source Fool.com
