Alcoa Able To Sell Less-Bad As Good (AA)

Alcoa Inc. (NYSE: AA) posted a narrower-than-expected loss of -$0.26 EPS on a non-GAAP basis and -$0.32 EPS from continuing operations.  Revenues were down sharply to $4.24 billion (from $7.62 billion a year ago), but also narrower-than- expected.  Thomson Reuters had estimates at -$0.38 EPS and $3.93 billion. The company generated cash from operations in the second quarter of 2009 of $328 million, an improvement of $599 million from the first quarter.

The year-over-year comparisons remain atrocious, but this is actually a 2% sequential gain in revenues.  To illustrate how challenging the environment is, here are its issues on base metal prices:

• The average price of aluminum on the London Metal Exchange in the second quarter of 2009 was $1,485 per metric ton (mt), a nine percent increase from the first quarter of 2009, but a 49 percent decrease from the second quarter of 2008.
  

Alcoa has also claimed to have achieved about $1.0 billion in procurement savings through the first half of the year, which it says is close to two-thirds of its annual target. It listed its overhead savings so far this year as about $270 million, which is supposed to be 134% of the 2009 target.

Alcoa shares closed up 0.5% at $9.46 on the day, and shares are halted in after-hours trading.  Its 52-week trading range is $4.97 to $35.66.

We showed an eight quarter parallel to both the S&P 500 ETS in the SPDR and against the SPDR S&P Metals & Mining ETF (NYSE: XME) to show how this is not really correlated to the returns of the indexes.  But in after-hours trading, the XME ETF is trading up 0.65% at $33.10 after closing down 1.4% at $32.88.

Jon C. Ogg
July 8, 2009