Alcoa (NYSE: AA) reported their earnings after the close yesterday and the market punished it today (chart). In Sunday’s (blog) I eluded to the fact that companies cannot afford to miss their mark and even though Alcoa had a very strong quarter with revenue coming in at $6b, the revenue number came in below analysts expectations of $6.3b.

So what could this mean for the rest of the companies that have yet to report? Bluntly, stocks can and will get hammered when expectations are not met. In fact, I believe that if companies do not far exceed expectations or do not provide strong guidance, their stocks can also be taken out to the cleaners such as what happened to Alcoa today. This could of very well been an overreaction in today’s price action of Alcoa’s stock, for when you read the highlights of their earnings report, this company is seemingly knocking it out of the park.

One thing is for sure, this earnings reporting season will not be for the faint of heart. Stocks seemed to be priced to perfection and if Alcoa is any indication, companies better blow out their numbers if they want to be rewarded by the street.

Have a good evening.

~George