Alcoa Earnings Preview

Pessimism on Wall Street seems to be mounting ahead of Alcoa’s earnings release. Alcoa is scheduled to report their second quarter 2010 results after the market closes on Monday, July 12.


Analysts have been revising their estimates downward ahead of Alcoa’s earnings release next week. Last month, analysts expected the aluminum manufacturer to earn $.17 per share. Last week, those expectations had fallen to $.15 per share. Now Wall Street is only expecting Alcoa to earn $.12 per share.


Alcoa has had a spotty earnings performance in recent quarters. Since the third quarter of 2007, AA has delivered earnings results that were below expectations seven times. Last quarter, Alcoa reported earnings results that were $.01 above Wall Street’s consensus estimates. AA shares fell 1.6% following the earnings announcement.


The current Wall Street consensus estimates are for revenues of $5.07 billion and EPS of $.12. This would imply a 19% increase in revenues over last year’s $4.24 billion. Analysts also expect Alcoa to post a profit this year versus the ($.26) per share loss last year.  


In 2010, Alcoa’s shares have fallen nearly 35% and have badly underperformed the 3.4% decline in the Dow Jones index. Last year AA shares gained 43%, but still have not recovered from the 69% plunge investors experienced in 2008.


Alcoa stock is currently trading at 10x consensus 2011 EPS estimates. Alcoa shares are looking attractive as they are nearing their 52-week low, but the company needs to demonstrate the ability to deliver consistent quarterly results.


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