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The interest rate on 30-year US government bonds hit its highest level since 2001. These rates act as a benchmark for the rest of the economy, meaning it now costs more for companies to borrow money for long periods of time.
For a company like Alcoa, which runs massive mines and smelters, higher borrowing costs can be a burden. The company relies on debt to fund its heavy equipment and long-term infrastructure projects. If these high rates persist, it could make future expansions more expensive or eat into the cash available to pay shareholders.
Wholesale prices, which measure what businesses pay for goods and services before they reach consumers, stayed flat in July. This suggests that the cost of living and doing business is starting to cool down after a period of high inflation.
For a company like Alcoa, this is a helpful sign for its profit margins. Alcoa spends heavily on energy and raw materials to mine bauxite and turn it into aluminum. If the prices of those inputs stop rising, the company can keep more profit from every ton of metal it sells, provided global aluminum prices stay steady.
Source: Market Watch
The company has a habit of clearing the bars set by analysts, beating earnings expectations in six of the last eight quarters even as revenue grows quickly.
| Expectation | |
|---|---|
| EPS | $1.56 |
| Revenue | $3.85B |