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Alcoa Stock Up After Earnings – Too Early to Say ‘I Told You So’?

This "Best Stock for 2012" shows its stuff


best stocks for 2012 logo1 Alcoa Stock Up After Earnings   Too Early to Say 'I Told You So'?Alcoa (NYSE:AA) reported a quarterly loss in its fourth-quarter earnings on Monday afternoon. However, the loss was expected after last week’s headlines about one-time restructuring charges at Alcoa, and AA stock rallied across Monday in anticipation of the report and tacked on a bit more after hours as a result.

Not to crow, but that’s just as I expected. Last week, I told you Alcoa stock was a buy despite the headlines — and the stock is up about 3% in two days as a result, and ready to tack on some more profits at the opening bell.

Alcoa also is up almost 10% since New Year’s Day, showing that — so far — it deserves my call as one of the top 10 stocks to buy and hold for all of 2012.

Now that I have the chest-thumping out of my system, allow me to turn to the matter I know you are most likely interested in: whether Alcoa remains a buy, and whether you should jump in.

Your answer: Jump in. With both feet — right now.

Here are the details on Alcoa’s earnings: AA met Wall Street’s expectations on the profit side (or lack thereof, considering the 3-cent loss on the quarter), and revenue was above analyst forecasts. Alcoa revenue hit $5.99 billion, an increase from $5.65 billion a year ago. Forecasts were for just $5.7 billion.

This gain should not have surprised you if you’ve been watching Alcoa’s numbers lately. This marks the eighth consecutive quarter of year-over-year revenue increases for the aluminum giant. And while the -3 cents on the quarter is a bit of black eye, keep in mind that the aforementioned restructuring will help Alcoa remain competitive in the long term. And despite that setback, earnings still managed to soar 270% over full-year profits for 2010.

The fundamentals of Alcoa are improving, and the company remains on the rebound. A slower global economy has hurt aluminum demand in industries ranging from construction to durable goods to automobiles, but AA is streamlined and prepared to profit in this environment — and ride the recovery when it takes shape. That makes it a great buy-and-hold investment for 2012.

Before I stick my foot in my mouth up to the ankle, I must concede that a long-term play in Alcoa is like buying a fixer-upper home. Sure, if you get the house in order, you just got yourself the bargain of the century — but what if you discover there’s more at play here than threadbare carpets and outdated bathrooms? What if there’s termites or a leaky foundation that mean your “bargain” home is really a money pit?

This is assuredly a risky play. And I have made my share of bonehead calls on risky plays, believe me. Those with a good memory will remember me patting myself on the back when Bank of America (NYSE:BAC) hit $14 in 2011… and we all know how that ended up months later.

But I remain convinced that over the long term, there is a lot of upside and limited downside in Alcoa. Most of my arguments in my initial recommendation for Alcoa in December are valid — and have only been reinforced by this latest earnings report.

Granted, there are 357 days left in 2012 — so I am counting my chickens before the eggs are laid, let alone hatched.

But I remain convinced that Alcoa is a great buy for the long term, and investors should have even more confidence in this stock after earnings.

Full disclosure: I did indeed put my own money in this stock, too, as a way to put my money where my mouth is with this Best Stocks of 2012 contest. I purchased 540 shares of AA stock at $8.95 on Dec. 14. I hope that adds a bit of realism to my commentary on the stock across the year!

Jeff Reeves is the editor of InvestorPlace.com. Write him at editor@investorplace.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. Jeff Reeves holds a position in Alcoa, but no other publicly traded stocks.

Article printed from InvestorPlace Media, http://investorplace.com/2012/01/alcoa-earnings-aa-stock-revenue/.

©2014 InvestorPlace Media, LLC

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