Alcoa Earnings Preview – Kicking Off Earnings Season
Alcoa [[AA]] kicks off the first quarter earnings season next week when they report their first quarter 2010 results after the market closes on Monday, April 12.
Alcoa has reported disappointing earnings results in four out of the last six quarters and has seen its stock price fall 68% since July 2007. EarningsPreviews.com is predicting yet another tough quarter for the aluminum stock.
Last year, Alcoa earned -$.80 per share and saw revenues decline over 31%. Klaus Kleinfeld, Alcoa’s President and CEO, commented last quarter, “This was a tough year for the aluminum industry – a price crash, demand destruction, and credit crunch.”
Despite the difficult financial performance, Alcoa’s shares delivered an impressive 43% gain last year. However, since the beginning of 2010, Alcoa’s stock has dropped nearly 9%, and has been the worst stock performer in the Dow Jones index.
Alcoa’s stock performance tends to move in-line with aluminum prices. While aluminum prices rose over the course of the first quarter, it is doubtful that the positive effect of these rising prices will be felt until next quarter.
The current Wall Street analyst consensus estimates call for revenues of $5.25 billion and EPS of $.13. We are forecasting first quarter revenue of $5.18 billion and $.11 EPS.
Alcoa is now trading at 13x consensus 2011 EPS estimates. This is below the relative valuations of their peer group. We still believe that Alcoa could turn in a solid stock performance in 2010, but probably not in the near term with weak earnings results expected next week.