Earnings Preview : Alcoa Inc. (AA) First Quarter 2010
Monday, April 05, 2010 10:01 AM

Alcoa Inc  (NYSE: AA), the largest manufacturer of aluminium in the US, is scheduled to report its first-quarter 2010 results after the markets close on Monday, April 12, 2010. The company's earnings have been a mix of satisfactory and unsatisfactory in the last four quarters ended December 2009, with the first half of 2009 reporting unusual earnings losses while the second reporting gains. The upward trend in the earnings in the third quarter weakened resulting in a pure dilemma for investors.

Alcoa's fourth quarter results were the strongest in 2009, the first such quarterly gain and achievement since the global economic crisis which commenced in the second quarter of 2008. In this quarter, Alcoa generated free cash flow of $761 million, a $947 million improvement vis-a-vis from the previous quarter of 2009, primarily driven by strong cash from operations performance of $1.1 billion, a $940 million increase from the previous quarter.

Alcoa Inc. is engaged in the production and management of primary aluminum, fabricated aluminum, and alumina combined. The company's products are used worldwide in aircraft, automobiles, commercial transportation, packaging, building and construction, oil and gas, defense, and industrial applications. Alcoa is a global company operating in 31 countries. Alcoa has investments and operating activities in Australia, Brazil, China, Iceland, Guinea, Russia, and the Kingdom of Saudi Arabia. Alcoa's operations consist of four worldwide segments: Alumina, Primary Metals, Flat-Rolled Products, and Engineered Products and Solutions.

Analysts' estimates for Q1 2010 range from a low of $0.05 to a high of $0.31, compared to a consensus estimate of $0.16, with the number of estimates being 12 and a coefficient variance of 56.81. The consensus estimate has dropped over the past week by nearly 1.5% due to

1) closure of smelting plants in Italy,

2) lay off of up to 145 workers from the southern Indiana factory, and

3) slower than expected demand for the company's products especially in the food and beverages segment. Alcoa is slated to officially kick off the earnings season when it reports on April 12 and analysts expect to see more robust growth when corporate earnings roll in this month, though this time prior-year comparisons should be a little less skewed than they were in the prior quarter.

Alcoa Inc. also declared (a) a quarterly common stock dividend of $0.03 per share payable February 25, 2010 to shareholders of record at the close of business on February 5, 2010 and (b) a quarterly dividend of $0.9375 per share on Alcoa's $3.75 cumulative preferred stock payable April 1, 2010 to shareholders of record at the close of business on March 12, 2010.

In June 2009, Alcoa completed the divestiture of the wire harness and electrical portion of the EES business to Platinum Equity effective June 1, 2009. In December 2009, Alcoa completed the divestiture of the electronics portion of the EES business to Flextronics Inc.

With the stock closing at $14.70, up by 3.23% on 1st April, consensus recommends a strong hold as a re-rating is quite possible with the results being a major catalyst. 



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