Monday, January 10, 2011

Alcoa (NYSE: AA): Q4 Earnings Preview 2010

Alcoa Inc. (NYSE: AA) is scheduled to release its fourth-quarter financial results after the closing bell on January 10, 2011. Analysts, on average, expect the company to report earnings of 19 cents per share on revenue of 5.68 billion. In the year ago quarter, the company reported earnings of 1 cent per share on revenue of $5.43 billion.

Alcoa Inc. engages in the production and management of primary aluminum, fabricated aluminum, and alumina worldwide. The Company’s products are used worldwide in aircraft, automobiles, commercial transportation, packaging, building and construction, oil and gas, defense, and industrial applications.

In the preceding third quarter, the Pittsburgh, Pennsylvania-based company's net income was $61 million, or 6 cents per share, compared to $77 million, or 8 cents a share, in the year-ago quarter. On an adjusted basis, the company earned 9 cents per share in the latest quarter. Revenue climbed to $5.29 billion from $4.62 billion in the same quarter last year. Analysts, on average, expected a profit of 6 cents a share on revenue of $4.95 billion. 

At its last earnings call in October, the company raised its forecast for global aluminum demand to 13% from 12%.  Last month, the company  said that the growth in the aluminum industry is expected to double over the next 10 years. The company foresees the growth as China and Brazil urbanize and turn to more sustainable products in transportation, buildings and packaging. From Global Rolled Products, Alcoa said it is targeting approximately $2.5 billion in additional revenue by 2013, and expects another $1.6 billion additional revenue by 2013 from Engineered Products and Solutions.

Aluminum prices, which slumped early last year has recovered amid increased economic optimism and investor appetite for riskier assets. Prices have also got a boost from weaker dollar, recovery in housing market, stabilization in auto industry, consumer restocking and Chinese buying. In the past 12 months, aluminum prices have jumped 54 percent in London. Historically, the automotive and construction markets have been the largest drivers of metal consumption, more than 50% of the total demand. 

Meanwhile, Chinese demand for aluminum continues to grow at a rapid rate. The growing middle classes of India and South America are also stretching supplies, as construction and the number of individuals driving automobiles is increasing fast. At the same time, aluminum smelters in China are facing a “critical shortage” of power that prevents them from ramping up output in the first quarter of 2011, helping to buoy prices as stockpiles decline further. China curbed power to energy-intensive industries in the final quarter in a bid to meet a yearend carbon-emission target, hurting output of some metals including aluminum. More than 2 million metric tons of aluminum capacity was halted in Guangxi, Guizhou, Henan and Hunan in the drive. Three-month aluminum on the London Metal Exchange has gained nearly 5 percent since the start of the fourth quarter.

In terms of stock performance, Alcoa shares have lost nearly 5 percent over the past year.

Full Disclosure: None.
Related Posts with Thumbnails

Wikinvest Wire