Wednesday, October 6, 2010

Citigroup (NYSE:C) Sees Alcoa's (NYSE:AA) Earnings Dropping

In a preview of Alcoa's (NYSE:AA) earnings report on Thursday, Citigroup (NYSE:C) said via its Citi Investment Research arm that they see earnings lower than they originally estimated.

Citi said in a note to clients, "Alcoa is scheduled to report 3Q earnings after the market close on Thursday, October 7th. After adjusting our model for lower average aluminum prices, we now expect the company to post 3Q EPS of $0.05, down from $0.12 previously, and compares to consensus $0.06. We believe investors are already expecting disappointing 3Q results based on lagging AA shares relative to the recent surge in aluminum prices."

Assuming aluminum prices are able to remain at the levels they are, Citi said this about the fourth quarter:

"Citi goes on to say, "With spot aluminum trading at $1.06/lb, AA could post earnings of $0.20/lb in 4Q if aluminum prices were to remain at the current level for the full quarter. Recent moves by China to eliminate preferential power rates and restrict power to inefficient smelters are having an impact on production. China's August daily aluminum production declined for the second straight month to 44.8k tons/day vs 45.7k tons in July and a record high of 47.5k tons in June."

Alcoa closed Tuesday at $12.14, gaining $0.22, or 1.85 percent. Citi has a price target of $16 on them.

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