The response to Alcoa (NYSE:AA) beating street estimates yesterday for the last quarter has resulted in the stock of the company rising almost 7 percent in early trading. Citigroup (NYSE:C) maintained their "Buy" on Alcoa and JPMorgan (NYSE:JPM) raised their rating on the aluminum giant.
Is the market response to Alcoa (NYSE:AA) too positive? It may be.
Earnings were still down 21 percent, and that has largely been ignored as the financial press is gushingly focusing only on the results that suit a positive story.
All that happened was the quarter wasn't as bad as expected for Alcoa.
Aluminum prices in the third quarter were down and the dollar was up, cutting into earnings for them.
Alcoa's estimate for global aluminum demand for 2010 was increased from 12 percent to 123 percent, citing emerging markets as the driver of that, saying “more and more people are moving into the middle class, driving demand in building and construction, transportation and packaging.”
Some believe the discounted share price of Alcoa is justified though, as they have to prove they can get earnings up as the price of aluminum rises. The last several years they haven't been able to do that.
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