Alcoa's 2Q earnings better than expected, is the recovery on?
Filed under: Company News, Earnings
Ring the bell, sound the trumpets, bang a gong, whatever you do to signal that earnings' season has begun, because Alcoa (AA) has reported second-quarter earnings and the game is on.
The metals firm reported a quarterly loss of 26 cents per share (excluding restructuring charges), far better than the consensus estimate. Sales came in stronger than expected as well, with the company selling $4.24 billion of product. During the previous two quarters, AA lost nearly $1.7 billion, so one cannot fault the Street for its expected loss of 39 cents per share with sales of $3.93 billion.
Just yesterday, three analysts changed their outlook. Two of those analysts upped their outlook (and now look like geniuses) and one shifted the forecast lower. Perhaps this was in reaction to AA's CEO Klaus Kleinfeld's assertion that "China is out of the woods and growing, particularly in its automobile and commercial-building and construction markets."
Some analysts took this statement as a hint that second-quarter results would come in stronger than expected while others believe that it foreshadowed a stronger-than-expected third quarter. As for the third quarter, Kleinfeld believes, "Alcoa has the staying power and reduced cost base to withstand the most serious downturn in the history of the aluminum industry."
What should we expect tomorrow? Best guess is that Alcoa finishes higher amid a bit of earnings-based euphoria. Can it last? Of course, this is yet to be determined, but I am a bit concerned about the rallying cry about how good the results are, especially in light of the International Monetary Fund's assertion that the economic recovery will be sluggish. Let's not forget that the company posted a profit of 66 cents per share a year ago, when the economic recovery was supposed to be on the horizon.
I am not trying to play the role of the resident bear, but I am not sold that a company reporting a smaller than expected loss proves a full-fledged recovery is in the cards. A loss is a loss is a loss -- or, as athletes say, it is what it is. Let's just see how the market reacts tomorrow.
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Reader Comments (Page 1 of 1)
7-08-2009 @ 5:08PM
Panther said...
Alcoa up over 8% in the after market. "Less worse than expected" season has arrived. Market is going to rally on this BS but it won't last. It's a great time to be a trader though - it's the only way to make money in stocks (easier and cheaper than going to Vegas, and it's so easy to figure out how Wall Street plays their games). Buy and hold people (investors) will get killed once again when earnings season ends.
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7-08-2009 @ 5:14PM
Iridium said...
The late day rally in the DOW was a signal that the large institutional traders got word of Alcoa's earnings report early. They always do.
Look for a 200 point upsurge in the DOW tommorow with a new oil spike back to $70. That is if the current market manipulation holds up.
There was no reason for oil to trade down 13% over the past week unless some major players were manipulating the market down to create a buying opportunity. The whole thing smelled fishy right before the start of earnings season just as it did right before Q1. We ended up with one of the greatest runs in market history in the middle of a steep downturn that hasn't even come close to abating.
Because of the low trading volume the manipulation is rampant. The real story will once again be lost. Alcoa lost a ton of money and the loss excluded a huge portion of money set aside for restructuring. It is just maipulated accounting but to Wall Street the loss of 26 cents per share is actually a 13 cent gain because it topped analyst expectations.
THE COMPANY STILL LOST MILLIONS. HOW IS THAT A GOOD THING. MILLIONS IN LOSSES STILL SHOWS WE ARE STILL FALLING.
Alcoa's loss is even worse because they are a global corporation with huge ties to China. If China is doing so well then how can Alcoa lose so much? Again common sense fails.
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7-08-2009 @ 7:48PM
CAVUTO said...
IF G.E. HAS NOTHING TO HIDE THEN WHY DON'T THEY JUST OPEN THEIR BOOKS TO ALL INVESTORS TO PROVE THEY DON'T HAVE DEBT ISSUES..THE FACT IS THEY WON'T BECAUSE THEY ARE IN DEBT UP TO THEIR EYEBALLS..IT'S GOING TO BE YEARS BEFORE YOU SEE THIS STOCK MOVES UPWARDS SIGNIFICANTLY..
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7-08-2009 @ 11:39PM
Andy said...
sure there good. riiiiiiiight.
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7-09-2009 @ 6:59AM
MyKisa said...
takes a lot of energy to make aluminum
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7-09-2009 @ 7:18AM
Gary said...
Recovery is on the horizon, and this is proof, although the pessimists will say otherwise. Look at other story, Chinese buying cars like crazy. What does this mean? Simple. They need gas to run. Gas prices to go up again soon, which means there will be no deflation and in fact, look for inflation to rise to 4-5% within next year when slowdown stops and recovery begins. Chinese are not the only market for Alcoa which is why they are still down, but US will be the last market to pull out of recession since being hit the hardest with housing bubble burst.
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7-09-2009 @ 7:42AM
tom said...
Lost your job yet, keep buying foreign.
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7-09-2009 @ 8:25AM
dang said...
ALCOA a Chinese Company in China... Who the dumb F*CK would believe this BullSh*t propaganda???
The last time I checked just minute ago, the Chinese and cops are throwing rocks and clobbering at each others. President Hu Jintao had to rush quickly back to China from his G-8 meeting yesterday to order more police troops to control the RIOT killings there!!!
Ok, name one aluminum finished product that is selling so hot that you bunch of BABOONS claims to somehow boosting ALCOA share up???? HUh, what???? You can't name one????
So are you telling me that this BullSh*t rumor of ALCOA share movingup is nothing but BullSh*ts to fake, entice and LURE investors to jump right into a sinking ship????
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