Alcoa Kicks Off Earnings Season With Miss
Slowdown in U.S., Europe negates strong demand abroad.
Earnings season is off to an ominous start.
Alcoa Inc (AA) announced first quarter results yesterday after the bell, indicating less-than stellar profits amid higher energy and environmental costs and a weak dollar. According to Bloomberg:
- First quarter net income fell 54% from last year.
- Total sales fell 6.7% to $7.4 billion.
- Net income dropped to $303 million, or $0.37 per share, compared to $662 million or $0.75 per share last year.
- Excluding certain items, profit was $0.44 per share, below analyst estimates of $0.50 per share.
Despite the recent uptick in commodity prices, Alcoa sold aluminum for 3.5% less than it did a year ago. Slowdowns in both the U.S. and Europe hurt sales, but strong demand for the metal from developing countries helped support the top line. Stiff competition, industry consolidation and high input prices squeezed margins. Russia's Rusal and Rio Tinto Alcan (RTP) now both sell more aluminum than the former top producer.
Alcoa sells most of its aluminum in dollars and said the weak greenback reduced earnings by eight cents per share. When the company purchases materials and pays workers in foreign currencies, those input costs rise as the U.S. currency falls.
Alcoa's earnings miss is particularly disturbing, as it shows a slowdown in Europe and the U.S. can still negate gains in developing countries. In time, emerging economies like China, India, Russia and Brazil will compensate for the lost demand, but for right now profits are still closely tied to the developed world.
Results from the world's third largest producer of aluminum mark the unofficial start to earnings season. Wall Street is hoping an economic recovery in the second half of the year will help erase the memory of the last nine dismal months. But as long as the credit outlook remains unresolved and jittery investors focus on near-term earnings forecasts, disappointments will continue to pressure stocks.
The information on this website solely reflects the analysis of or opin=
=3D =3D3D ion about the performance of securities and financial markets by =
the wr=3D iter=3D3D s whose articles appear on the site. The views expresse=
d by the wri=3D ters are=3D3D not necessarily the views of Minyanville Medi=
a, Inc. or members=3D of its man=3D3D agement. Nothing contained on the web=
site is intended to con=3D stitute a recom=3D3D mendation or advice address=
ed to an individual investor =3D or category of inve=3D3D stors to purchase=
, sell or hold any security, or to =3D take any action with re=3D3D spect t=
o the prospective movement of the securit=3D ies markets or to solicit t=3D=
3D he purchase or sale of any security. Any inv=3D estment decisions must b=
e made =3D3D by the reader either individually or in =3D consultation with =
his or her invest=3D3D ment professional. Minyanville write=3D rs and staff=
may trade or hold position=3D3D s in securities that are discuss=3D ed in =
articles appearing on the website. Wr=3D3D iters of articles are requir=3D =
ed to disclose whether they have a position in =3D3D any stock or fund disc=
us=3D sed in an article, but are not permitted to disclos=3D3D e the size o=
r direct=3D ion of the position. Nothing on this website is intende=3D3D d =
to solicit bus=3D iness of any kind for a writer's business or fund. Mi=
ny=3D3D anville mana=3D gement and staff as well as contributing writers wi=
ll not respo=3D3D nd to em=3D ails or other communications requesting inves=
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter