Alcoa’s Big Positive Surprise (AA)

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Alcoa, Inc. (NYSE: AA) has managed to pull a rabbit out of its hat and it is the good kind.  The aluminum giant and DJIA component just reported earnings of $94 million or $0.09 EPS on sales of $6.01 billion.  The earnings per share would have even been $0.10 EPS outside of special items.  The report is shocking because the company just announced Atlantic basin production cuts last week.  Who was expecting strength after that?  Thomson Reuters projected estimates of a loss at -$0.04 EPS and $5.77 billion in revenues.

For the yearly growth Alcoa sees global aluminum demand up 7%.  Other areas for 2012 are as follows:

  • automotive growth at 3% to 7%;
  • aerospace 13% to 14%;
  • commercial transport 1% to 5%;
  • packaging 2% to 3%;
  • industrial gas turbines 1% to 2%;
  • building & construction 2.5% to 3.5%.

Chairman & CEO Klaus Kleinfeld noted Alcoa’s performance was based upon a focus on profitable growth and stabilizing markets.  He further talked up Alcoa’s “aggressive strategy to move down the cost curve in the upstream businesses” and its move to record profitability in the midstream and downstream businesses.  Demand and shipment control were key because the firm noted that a 9% drop in the realized price of aluminum and a 13%  drop in the realized price of alumina.

Shares closed down 2.9% at $9.32 against a 52-week trading range of $8.45 to $17.96.  This report truly was a surprise when you consider the recent news and caution out there about earnings from the first quarter.