Tuesday, May 25, 2010

Alcoa (NYSE:AA) Earnings Power Questionable

The growing fears over a global economic meltdown from the sovereign debt crisis in Europe, along with an expected slowdown in demand for raw materials in China has Alcoa (NYSE:AA) and other raw material producers under revenue and earnings pressure, as expected demand may not appear in the near-term, and that has the companies scrambling for answers that don't seem to be out there.

For Alcoa, the one positive is the proposed launch of several aluminum ETFs later in the year which could create a demand that didn't exist before.

Rusal is carrying the brunt of that supply though, but word is out that they are having trouble meeting the demand, and Alcoa seems to be next in line to meet that demand.

The problem is there aren't any figures out yet as to how much that will have an effect on Alcoa, and how much aluminum that will account for.

So based on existing conditions, Alcoa will be under earnings pressure for some time, and there doesn't seem to be anything ahead that will change that.

A growing number of those following the company believe they'll be lucky to reach even a $1 in earnings a share, with most thinking about 70 cents. That could even be questionable if an expected slowdown indeed happens.

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