Kaiser Aluminum (KALU) announced that its first quarter profit more than doubled. For the first quarter, which ended March 31, the company said its net earnings were $39.1 million, which amounts to $1.92 per share. During the same quarter a year ago, the company earned $17.1 million, or $0.85 per share. This was huge growth for the company and likely appeals to long-term stock trading strategies.
The note that should have really inspired stock trading, however, was the fact that analysts had only expected $1.06 in earnings per share for the company. Kaiser said it soundly beat estimates because of gains from hedging of investments. Revenue for the company climbed to $399 million, from $392.2 million. Analysts had expected revenue to come in at $378.6 million.
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The stock investing community must have had either higher expectations for the company, or they did not put a lot of faith the in the profit derived from hedge investments. The stock’s share price dipped over 7 percent in regular trade following the announcement. It is possible investors think the strong portion of the company’s profit generated from hedge investing is not likely to continue and does not bode well for the company’s ability to generate profit from normal business practices.
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One year price targets have the stock trading up to $89.25. This suggests that there should be significant room for the stock to grow from its current trading position just below $70. Income based investors might also find the company’s 72 cent annual dividend appealing if they are using a longer-term income generating stock trading strategy.
The sharp fall after the announcement could potentially be a good entry point for a covered call investing position on Kaiser. The strong dip following the announcement seems more likely to entice dip buyers looking to get the stock into their trading portfolio and a good price rate.
Kaiser, which makes fabricated aluminum products, also said it benefited from higher prices on its products and lower costs for materials. This is partly why they were able to generate a huge increase in profit despite the more modest growth in revenue. Effective pricing and cost management are usually positives that give a stock help.
Aerospace and defense agencies are two of the sectors that support much of the companies business. The earnings report noted that there has been consistent and increased demand within these sectors over the last several months, which has contributed to the growth in revenue and stable pricing.
It will be interesting to see what the company does in the next several months in terms of its revenue and earnings performance. A similarly strong profit growth for the second quarter may do more to ease any concerns investors have about the long-term potential of Kaiser.
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[tags] KALU, Kaiser Aluminum Corp., covered call investing, covered call strategies, hedge investments, investing in stock options, poweroptions, stock help, stock investing, stock market help, stock market investment strategies, stock options, stock trading [/tags]