Alcoa looking less and less like a market bellwether

Tue Apr 9, 2013 1:12pm EDT
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By Rodrigo Campos and Chuck Mikolajczak

NEW YORK (Reuters) - Alcoa Inc (AA.N: Quote) gets a lot of attention at the start of every quarterly earnings season.

The aluminum producer's cache is burnished by its membership in the Dow Jones Industrial Average .DJI and its long history of being the first of the so-called blue chips to report its results each quarter.

However, Alcoa's earnings performance is so frequently divergent from key end markets like autos and construction, and its stock is such a notorious laggard, that some in the market question the company's status as a bellwether.

"I know accountants there that are like sweating blood to get this stuff out. They want to lead off, but for the longest time now, I don't know that they are a bellwether for the economy in general," said Kim Forrest, a senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.

Take the stock's performance: Alcoa shares are down 3.9 percent for the year to date, while the Dow has gained 11.6 percent and the S&P 500 .SPX has added 9.7 percent.

Alcoa's stock hit a cyclical bottom in March 2009, around the same time the Dow and S&P 500. But while both market gauges have recently posted historical highs, Alcoa is 83 percent below its record high of $48.77 hit in mid-July 2007.

Alcoa is also by far the smallest stock in the Dow, with a market capitalization of $8.9 billion, less than a third of the next smallest, Travelers Cos (TRV.N: Quote) at $32 billion.

Arguably, its diminutive size could be grounds for removing Alcoa from the Dow, although the index manager is loathe to make frequent changes, and Alcoa has been in the index since 1959.   Continued...

People leave the Alcoa Business Services Center in Pittsburgh, Pennsylvania in this February 13, 2007, file photo. REUTERS/Jason Cohn/Files