Alcoa Earnings: Less-Bad Than Expected

Alcoa Inc. (NYSE: AA) is generally thought of the company that kicks off the trends of earnings season. The reality and perception of this may be up for debate, but nonetheless Alcoa is a DJIA component. The aluminum giant reported earnings of -$0.13 EPS but that was $0.03 EPS if you back out special items for a non-GAAP report. Revenue was down 9% to $5.8 billion on lower realized prices of 17% to 20%.

Estimates from Thomson Reuters were $0.01 EPS and $5.57 billion in revenue, but that is down from $0.15 EPS and $6.42 billion in revenue a year ago. While the report has some obvious negatives and talks about a sluggish economy, Alcoa said that the company showed solid revenue despite lower aluminum prices and it saw continued record results in midstream and downstream business segments.

We really wanted to know if Alcoa was going to hold on to its prior notion that the global aluminum sector would double by the year 2020. The only hint at guidance so far was that Alcoa is on track to deliver against its financial and operational targets in 2012. Unfortunately, it went on to say that it is moderating its 2012 global aluminum demand forecast to 6% from 7% as a slowdown in China slightly impacts the second half outlook. The aluminum market grew 13% in 2010 and 10 percent in 2011, and is said to be well ahead of the 6.5% compound annual growth rate needed to meet Alcoa’s projection of a doubling of aluminum demand 2010 to 2020.

Shares have recovered to $9.13 after a summer low took shares under $8.00 briefly. The 52-week trading range is $7.97 to $11.66 and the market capitalization rate was almost $9.8 billion at the close. Analysts had a consensus price target at $10.66 without taking the post-earnings reaction into consideration.

The after-hours reaction has shares up 1.3% to $9.25 as the news is deemed not as bad as what was expected.

JON C. OGG