Stock Market News: Alcoa Falls on Supply Fears; XPO Soars on Breakup Plans

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Wall Street has been in a good mood in 2020, and the gains kept coming for the stock market on Thursday morning. Investors remained optimistic after the signing of the phase 1 trade deal between the U.S. and China, and hopes for a strong earnings season helped sustain the January rally. As of 11 a.m. EST, the Dow Jones Industrial Average (DJINDICES:^DJI) climbed 172 points to 29,202. The S&P 500 (SNPINDEX:^GSPC) gained 16 points to 3,305, and the Nasdaq Composite (NASDAQINDEX:^IXIC) rose 57 points to 9,316.

With the new year still young, companies continued to give their views on how things are likely to go in 2020. Alcoa‘s (NYSE:AA) earnings report pointed to some of the challenges that the aluminum producer is facing, but XPO Logistics (NYSE:XPO) created some excitement as it considers a major strategic shift that could result in the company breaking itself up into multiple parts.

Losses hit Alcoa

Shares of Alcoa dropped 11% Thursday morning after the aluminum producer reported its fourth-quarter financial results. Although the company is no longer the first major enterprise to report its quarterly results each earnings season, many still follow Alcoa as an indicator of how the materials sector is performing.

Bauxite, a raw material for aluminum production. Image source: Alcoa.

Recently, those signs haven’t been positive. Alcoa saw revenue plunge 27% from prior-year levels during the quarter, and the company reversed a year-ago profit with an adjusted net loss. Alcoa pointed to weak conditions in the aluminum and alumina raw material markets as contributing to the pressure on the company.

Alcoa has worked hard to try to get itself into a more favorable position. CEO Roy Harvey highlighted the sale of noncore assets, negotiating new labor agreements, and working on improving its business operations. Strong production levels were encouraging, although one big question facing Alcoa is how it will deal with a potential glut of supply on global markets.

A lot will depend on where Alcoa’s restructuring efforts end up. For now, though, shareholders seem cautious about expecting too much from the aluminum specialist.

XPO hits the gas

Meanwhile, shares of XPO Logistics soared 12%. The transportation, shipping, and logistics company said that it would explore strategic alternatives for one or more of its business units, with the hope of producing exactly the boost to shareholder value that the stock’s move delivered.

XPO’s board said that it would look at a possible sale or spinoff of certain businesses in connection with the strategic review. CEO Bradley Jacobs noted that although the stock has delivered tenfold returns to shareholders since 2011, XPO’s shares trade at levels that he sees as being “well below the sum of our parts and at a significant discount to our pure-play peers.” By exploring a breakup, XPO hopes that it’ll get Wall Street to recognize the true value of all of the company’s businesses.

Shipping stocks have been in flux lately, as the rise of e-commerce has created new tensions within the industry. Even as traditional logistics providers like XPO have benefited from greater business volume, some e-commerce specialists have looked at bringing transportation services in-house. That poses a huge threat to those companies with the strongest relationships to big e-commerce players.

XPO’s move is designed to get the stock price to match the business success that the company has had over the years. There’s no guarantee that’ll happen, but shareholders are happy to see XPO making the effort.