Alcoa Starts Earnings Season Off With Confusion (AA)

Alcoa, Inc. (NYSE: AA) is a stock that traders and investors alike try to use as a proxy for earnings season for the market as a whole and for the metals sector.  Sometimes it cooperates, sometimes not.  Either way, it is the first DJIA component and the first major industrial player to report each earnings season. The company has started this earnings season off with confusion with a report of -$0.19 EPS and $4.9 billion in revenues.  The loss from continuing operations does include restructuring and special charges of $295 million, or $0.19 EPS, so some will count this as a positive $0.10 EPS from normalized operations.  Thomson Reuters estimates are $0.10 EPS on $5.24 billion in revenue, which was down slightly from $0.11 EPS estimates just on Friday on slightly higher revenue estimates.

The company did note that its realized aluminum and alumina prices rose by 8% and 13%, respectively, from the fourth quarter 2009.  Alcoa also noted that most of the special items reported were non-cash and they do include “proactive decisions to structurally improve the company’s profit potential.”

The company further noted that its cash from operations in the quarter was $199 million, giving it $1.3 billion of cash on hand; and the debt-to-capital ratio stood at 38.1%, up 60 basis-points from Q4-2009 and up 250 basis-points from first quarter 2009.

There was no guidance offered in the press release.  The estimates for the coming quarter are $0.23 EPS and $5.69 billion in revenue, and $0.75 EPS on $21.61 billion in revenues for fiscal 2010.

We had noted that there seemed to be neutral bias here on how the stock will react to earnings.  This revenue figure just looks and feels soft for a company claiming price growth and claiming improvements.

Alcoa closed up 1.25% at $14.57 in regular trading and the stock was halted at the closing bell.  As of Friday traded around 18-times forward earnings and its 52-week range is $8.10 to $17.60.

JON C. OGG