Alcoa Kicks Off Earnings Season with Stronger-Than-Expected Growth

When Alcoa (AA) issued its first-quarter earnings report back in April, I wasn't impressed. I felt the shares weren't a buy, and I wanted a pullback. Well, we got one. In fact, the stock closed Monday's regular session at $10.87, not far from the 52-week low of $9.04. This was right before a new quarterly report was posted.

So should an investor consider Alcoa a potential buy? I definitely find the shares more attractive now than I did a few months ago. Further, the stock rose 3.5% in Monday's after-hours session.

Alcoa's second-quarter performance wasn't bad. The company generated a positive profit from continuing operations this time around compared to a loss 12 months ago.

But here's the really good news: Income of 13 cents per share beat expectations by a penny. It doesn't sound like much, I know, but judging by the after-hours action, it looks like Wall Street was happy with the results. Plus, the outlook for aluminum consumption appears to be better than management's previous estimate.

Although this stock doesn't come without risk, it might be a trade on the next pullback. If yesterday's rally after the regular session carries over into Tuesday's trading activity, I would not buy the strength. I'd wait for the stock to settle back, then plot a move.

Everyone is waiting for the bear market to be over, and they would love for it to start with Alcoa. But you've still got to be careful. If you do decide this Dow component is for you (after performing your own due diligence), be sure to use an appropriate stop to limit losses.