Alcoa Earnings Preview: Fourth Quarter 2009

Alcoa [[AA]] is scheduled to report their fourth quarter 2009 results after the market closes on Monday, January 11, 2010. Based on our analysis, we at are expecting AA to report better than expected quarterly results that will exceed Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $4.86 billion and EPS of $.15. This would represent a 15% decline in revenues from last year’s $5.69 billion in the same period. The current analyst consensus estimates calls for revenues of $4.81 billion and EPS of $.07.


The fourth quarter earnings season is expected to kick off with a strong earnings performance from Alcoa. The impressive recovery in aluminum prices in the fourth quarter should help Alcoa deliver a third consecutive earnings beat. The cost-cutting measures the company implemented in early 2009 should continue to boost the aluminum producer’s earnings results.


We anticipated that Wall Street analysts will increase their 2010 EPS estimates following Alcoa’s earnings report. The key to a strong performance in 2010 will be the continued strengthening of aluminum prices. However, the global economic recovery should keep aluminum demand strong for the next few quarters. The favorable comps that the company has beginning in the first quarter should also cause investors to take notice.


Stock Performance

In 2009, Alcoa’s shares gained an impressive 43% and outperformed the 19% gain in the Dow Jones industrial average. Since the end of February 2009, AA’s stock price has jumped a phenomenal 267%.



Shares are now trading at 26x consensus 2010 EPS estimates. This is a slight premium to the relative valuations of their peer group. While we expect that Alcoa’s stock will deliver positive returns again in 2010, but unless aluminum prices continue their upward trend investors should expect more modest gains this year.


Recommendation: Buy with a $20 price target

One Comment on “Alcoa Earnings Preview: Fourth Quarter 2009”

  • avinash singh wrote on 10 January, 2011, 14:34

    surely alcoa will beat street estimates considering the factor aluminium prices keep intact for the year in 2011

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