Alcoa shines a hopeful light on the economy

The aluminum maker's strong results -- and its forecast for good growth ahead -- should hearten bulls.

By Jonathan Berr Apr 9, 2013 12:24PM
An Alcoa logo is seen on glass at the corporate headquarters in Pittsburgh, Pennsylvania (© Jeff Swensen/Getty Images)Alcoa's (AA) better-than-expected earnings report yesterday showed that worries about a slowdown in the worldwide economic recovery may have been overblown -- though they are not without some justification.

New York-based Alcoa has its fingers in many different pies, such as aerospace,  automotive, packaging and construction, which makes it a good proxy for the overall economy. And the company continues to expect that global demand for aluminum will grow 7% in 2013, helped by a 9%-10% increase in aerospace and a single-digit rise across the rest of the sectors it serves. 

Even better news for Alcoa is its forecast that its surplus will decline to 155,000 metric tons in the quarter, down from 535,000 metric tons in the fourth quarter. That should help firm up aluminum prices, which of course will benefit Alcoa's bottom line. Prices for the metal on the London Metal Exchange have fallen 9.2% this year. My colleague Charley Blaine took a closer look at Alcoa's numbers yesterday.

Analysts are expecting aluminum demand from the automotive and aerospace sectors to remain robust. A likely rise in commercial construction will also help.

Alcoa reported net income in the last quarter of $149 million, or 13 cents a share, versus $94 million, or 9 cents, a year earlier. Excluding one-time items, profit was 11 cents, surpassing the 8-cent average estimate of analysts surveyed by Bloomberg. Revenue slipped 2.9% to $5.83 billion because of fewer production days. That lagged analysts' estimates of $5.88 billion.

"It's a solid, good quarter," said Alcoa CEO Klaus Kleinfeld, in an interview with CNBC.
 
Wall Street expects the good times to continue for Alcoa. The average 52-week price target on the stock is $9.73, about 16% above where it currently trades.

Jonathan Berr does not own shares of the listed stocks.  Follow him on Twitter @jdberr.

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2Comments
Apr 9, 2013 3:02PM
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Yes really shines - stock is down  but propaganda shines
Apr 9, 2013 2:32PM
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Well, i can lower my earning to match whatever i want also.  Lets see here so the estimates from the street will be around this........hmm, as a company i need to lower my earnings so i can beat the street...........TA-DA!  I beat earnings!  My companies doing awesome this quarter.  How dumb.
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