Monday, April 6, 2009

Will Alcoa Disappoint the Street Again?

. Monday, April 6, 2009

By stockOzone team
The largest US aluminum maker Alcoa (NYSE:AA) will officially announce its first quarter 2009 earnings after market close on Tuesday.

Analysts expect the company to report a quarterly loss in the range of 46 cents to 59 cents a share and revenue in the range of $4.1 billion to $4.08 billion.. The company reported a profit of 44 cents a share in the same quarter, a year ago. In January, Alcoa posted a quarterly loss of 28 cents a share, its first since 2003.

The Pittsburgh, Pennsylvania based company has been hit hard by sinking commodity prices amid deepening economic downturn. Prolonged slump in auto industry and housing market only compounded problems for the company. However, Alcoa has taken few bold steps to adjust to changed economic realities. As part of restructuring exercise, the company initiated massive layoffs to reduce operational expenses. Alcoa has cut production by 20% and and took a series of measure including asset sales and plant closures to curtail output. Recently, it slashed its dividend 82% to three cents a share in order to conserve cash.

Aluminum prices have dropped steadily since from a peak of $3,380 per tonne last July. Currently the price of aluminum is about $1,500 a metric ton, a 55% drop from its last year highs.

Wall Street is not quite optimistic about Alcoa's quarterly results which implies that much of the negativity has already been priced into the stock of the company. Though Alcoa CEO Klaus Kleinfeld expects a further decline of 6 percent to 7 percent in global consumption of aluminum, many experts are now seeing a glimmer of hope. There are already some signs of recovery in the housing market. The latest auto sales numbers too indicate relative stabilization in the market. According to analysts, Alcoa stands to gain in later part of this year as economy may post a recovery by late summer.

Alcoa shares have lost almost 80% in in the past 52 weeks. The shares monetarily surged up last month on speculation that the Alcoa might be a takeover target of mining group BHP Billiton (NYSE: BHP).

Shares of Alcoa closed at $8.17 Friday, down 1 cent or 0.12% from previous closing.

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