Alcoa (AA) Earnings, Revenue Plummet YOY

Earnings and revenue for aluminum giant Alcoa (AA) plunged from the same quarter last year, suffering a net loss of $143 million, with revenue falling from $6.42 billion last year to $5.83 billion this year. Earnings dropped from a profit of $172 million last year to a loss of $143 million this year. I'm not sure why the headlines are screaming about the company meeting analysts' expectations, as the expectations were so low it would have been hard to lose in that environment. Analysts had been looking for the company to generate revenue of $5.54 billion, and for earnings to come in even with last year's numbers. CEO Klaus Kleinfeld continues to beat the drum about aluminum demand going to double sometime between 2010 and 2020, but things will have to change drastically for that to happen in the years ahead. Of course there's little place to go up for the price, so if there ever is the beginnings of a real economic recovery, aluminum prices could shoot up, but there are far too many variables and questions concerning the global economy to be able to even suggest that is going to happen in the near future. Again, I'm not sure how these dismal numbers can be called a beat, other than analysts lowered their estimations so much that it was inevitable that Alcoa would surpass them. But at least they were able to. Anything less would have been an even greater disaster for the struggling company. Some of the segments Kleinfeld says grew were in the automotive business in the United States, as well as the aerospace unit. Alcoa closed at $9.13, up by a penny, or 0.11 percent. In after hours trading the company was down $0.10.

Alcoa (NYSE:AA) Sees Aluminum Demand at 6 Percent over Next Decade

Alcoa (NYSE:AA) says they see demand for aluminum growing at a 6 percent clip over the next 10 years, and Rio Tinto (NYSE:RIO), via their Alcan unit, estimates aluminum growing at 5.3 percent over the next decade.

Rio said at the pace of their aluminum demand projections, aluminum production will have to grow by about 66 percent to meet the growing demand.

Alcan sees supply plunging by 27 million metric tons annually, as measured against demand, if new smelters aren't brought online by 2020.

For Alcoa, over the next year the believe aluminum consumption will increase by about 13 percent.

There have been mixed views on aluminum supply and demand, as some commentators and analysts have said they think aluminum supply will be ample going forward.

Much will depend, as with most things at this time, one whether or not the global economy comes out of the recession, especially the western world.

But even if the West doesn't, demand from Brazil, Russia, India and China will drive the demand side of the aluminum equation.

Another unknown is how much aluminum ETFs will factor in. As the first ones are being developed now, and a new aluminum market based on physical storage is emerging, which is unknown as to how much that will affect aluminum demand.

Citigroup (NYSE:C) Maintains "Buy" on Alcoa (NYSE:AA) JPMorgan (NYSE:JPM) Upgrades Them

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.

Alcoa's (NYSE:AA) Performance Going Forward

While some celebrated the fact that Alcoa (NYSE:AA) analysts' profit estimates in the third quarter, they were still down 21 percent from previous results.

So even though aluminum prices helped their performance some, higher costs still cut into margins, generating lower results than they could have had. And that was with sales rising 15 percent to $5.3 billion.

Where does all this leave the company as it relates to the future?

They've already cut expenses to the bone, and while they may be able to whittle away a little more, there isn't much more it would to do affect the bottom line.

That means management has pretty much positioned themselves the best they can, other than possibly expanding through acquisition.

But that has its weaknesses as well, as the industry via its smelters can easily ramp up production and increase global aluminum inventory quickly, making acquisitions less desirable than other miners, such as in the gold mining industry.

One positive thing Alcoa and other commodity producing companies have going for them is the misguided policies of central banks around the world, who are committed to inflating (call it quantitative easing if it makes you feel better), which will drive down the value of the dollar, making it cheaper for overseas customers to buy aluminum in the case of Alcoa.

Lower prices alone can't be counted on though, as continued weaknesses in the global economy, especially in the West, could quickly skew the supply and demand picture, and little could be done if that ends up going down.

Since aluminum demand is for the most part coming from the emerging markets, that may not be as big of a factor, although it could still slow things down for a time, and stunt the rally they're experiencing now.

In other words, Alcoa is going to remain volatile and unpredictable, as there are too many factors happening at the same time to know which one will predominate and affect their markets.

One that can be counted on is weakening U.S. dollar and possible increased sales from overseas markets. If other things continue on as they are, that could be good news as long as the global economy and emerging markets remain fairly healthy.

That can't be measured by the West, as if they're not still in a recession, they're just on the other side of it, with the likelihood of dropping down into another one.

Alcoa's near and mid-term future is tied into emerging market growth. How they go will be how Alcoa goes, along with the secondary factors mentioned beyond supply and demand.

Aluminum Demand Pushes Alcoa (NYSE:AA) Profits Up

Alcoa (NYSE:AA) beat analysts’ estimates for profits in the third quarter as demand for aluminum grew.

Earnings came in at 9 cents a share after items, beating estimates of 5 cents a share. Net income dropped to $61 million, or 6 cents a share, down from $77 million, or 8 cents a share, last year in the same quarter.

Even though beating estimates, profits were still down by 21 percent, as expenses increased. During the quarter average realized aluminum prices rose 15 percent.

Sales for the quarter were also up by 15 percent, coming in at $5.3 billion.

A couple of factors helping Alcoa was the declining value of the U.S. dollar and the drop in aluminum inventories by 3.3 percent during the quarter.

Going forward, Alcoa sees increased demand for aluminum from the cutting back of production by Chinese aluminum smelters because of orders from the government to lower their energy usage.

CEO Klaus Kleinfeld said, "In countries such as China, Brazil, India, and Russia, more and more people are moving into the middle class, driving demand in building and construction, transportation, and packaging."

For the full-year outlook, Alcoa increased its aluminum consumption estimate from 12 percent to 13 percent.

In the third quarter aluminum prices averaged $2,110 a metric ton on the LME, up from $1,836 last year in the same period.

Alcoa (NYSE:AA) Can't Do Much But Hope and Wait

Alcoa (NYSE:AA) has done the things it needed to do to keep the company healthy, especially cutting costs throughout the recession.

But with the recession continue to batter the U.S. economy, and manufacturing down, there's very little in the near term Alcoa management can do, except to wait and hope.

It's all about aluminum demand and pricing for Alcoa, and in the near term nothing stands that changes the reality that demand will continue to remain down, along with prices.

Alcoa is scheduled to announce third-quarter earnings on October 7, and analysts don't see anything happening there that will change the outlook.

Expectations are they will generate a small profit for the quarter. Possibly around 6 cents a share.

All Alcoa can do now is wait for aluminum prices to go up significantly. So will shareholders in the company.

Alcoa (NYSE:AA) Hearing Over Yadkin River Begins Today

After contentious debate and legal maneuvers, hearings over whether or not Alcoa (NYSE:AA) will be able to renew a 50-year license to operate dams on the Yadkin river have begun today.

The issue is over a water permit issued to Alcoa by the state of North Carolina, which was opposed by some state officials and others.

Before the federal government would consider whether or not to renew the license of Alcoa, they must get approval from the North Carolina Division of Water Quality.

What is at issue concerning the water quality permit in relationship to the hearing is for the judge to decide to uphold it or not. If he does, they have a strong chance of having the license renewed for another 50-year period by the federal government.

Alcoa generates millions in revenue annually from selling hydropower from the dams. Over the 50-year period going forward, that would amount to well over a billion in profits, and possibly a lot higher depending on prices in the decades ahead.

This would be a blow to Alcoa who is mostly boxed in by the price of aluminum, if they lose the deal, as it's one of the few alternative sources of revenue outside the sector they serve.

Alcoa (NYSE:AA) Continues Upward Climb

Alcoa (NYSE:AA) has drawn a lot of interest over the last couple of days, after moving up close to 5 percent yesterday, and up another 2.5 percent today.

Volume has been strong, already surpassing its 3-month average at 1:40 PM EDT.

There is no known reason Alcoa is moving up, as aluminum prices have remained at about their six-week high.

Alcoa has done a good job of cutting costs, but that is already been factored into the price.

Even so, analysts like the stock over recent months, and it may be based on the probability it may have hit its low and has nowhere to go but up.

But with Alcoa going as aluminum demand and prices go, there's nothing on that end which explain this upswing.

Alcoa closed Wednesday at $11.70, gaining $0.53, or 4.7 percent. There were at $11.97, up $0.27, or 2.26 percent, at 1:44 PM EDT.

Freeport (NYSE:FCX) Ready to Take Off?

Some analysts have been getting very bullish on some metals company, with Freeport-McMoRan Copper & Gold (NYSE:FCX) being one of the top ones.

Their growth over the last 45 days or so is cited as a major factor, but I don't take that too seriously, as that seems to be a more arbitrary period picked, as you could start at the beginning of August and you would get a loss for the last month, while if you start at the July lows, you could say they gained about 15 percent.

No matter how one tries to spin it, in regard to the most important metals market as far as copper and aluminum, is China, and they've cut back on their consumption by 3 percent from last year, and even though they'll continue to grow, the rate is being cut down significantly from their concerns over the over-heated property market in urban areas.

So that will decrease demand for these metals in the short term, and there's nowhere else in the world that will make up for the slowdown in China.

With Freeport actually doing better than the underlying metals, even if prices increase in the second half, which is expected, they may have that already built into the price.

Commodities will continue to be strong, including metals, but it seems the companies like Freeport-McMoran which provide the commodities will continue to have a bumpy ride for the next couple of years at least, as economic data continue to confirm we're still in the midst of a lingering recession.

Will Alcoa (NYSE:AA) Survive Next Dow Change?

Inspecting the performance of Alcoa's (NYSE:AA) share price over the last 15 years or so, the figures show the price today, other than the period surrounding January, 2009, when it plummeted to as low as $7.34 a share on the 2nd, is about the same as it was 15 years ago.

Today its share price is at $10.71, down $0.02, or 18 percent, as of 1:06 PM EDT.

This made me start to think that Alcoa may be in danger of being removed from the DJIA.

Even though they did have a decent last quarter, and their CEO believes demand should grow by 10 percent in the next year, it's hard to see that happening in the light of the darkening economic conditions, which is being revealed as the stimulus money runs down.

It's not just the performance of the company though, as its market cap is just at $10.94 billion, while newer companies in the tech industry like Apple (Nasdaq:AAPL), which has a market cap of $228.64 billion, and Google (Nasdaq:GOOG), which has a market cap of $155.54 billion, are far more representative of the type of economy we have in the U.S.

Either way, Alcoa looks like it's going to struggle for some time to come, and as the economic story unfolds, it's looking more and more like that aluminum demand and prices aren't going to grow in the way thought just a short month or two ago.

Alumina (NYSE:AWC) Profits Soar on Sales Volume and Higher Prices

Alumina Ltd. (NYSE:AWC) had a huge six month, as it soared past the earnings last year in the same half by 11 times, increasing from $4 million to $44 million. Analysts had been expecting $37 million in earnings.

Driving the resurgence were a huge spike in sales volume and surging metal prices.

According to Alumina Chief Executive Officer John Bevan, “Global alumina demand is forecast to grow at 12 percent for 2010 and pricing has improved.”

Alumina is in a joint venture with aluminum giant Alcoa (NYSE:AA) named AWAC, which produces about 25 percent of the world's alumina supply.

In 2010, AWAC is projected to produce close to 15.6 million tons of alumina, a slight downward revision of 200,000 tons.

Going forward, Bevan expects alumina to decouple from the aluminum price and reflect more closely the market where alumina is sold by traders, which now accounts for 40 percent of the overall market.

Under normal and past conditions, alumina prices were set based at a fixed percentage of aluminum prices.

Over the next several years that's expected to change. Bevan says he supports that because the current pricing mechanism doesn't include the costs of production, and that needs to be changed.

Are Alcoa (NYSE:AA) Job Cuts Going to Hurt Company?

During the recession, Alcoa (NYSE:AA) was among the top companies for cutting workers, and once the recession is over, the question becomes whether they've cut their work force too much, and how that will affect their performance, and retention rates of existing workers, who will ultimately want changes.

Alcoa spokesman Kevin Lowery said, "We essentially eliminated 30,000 jobs. ... The way we look at it, is we have about 60,000 employees left,"

The point is in the eyes of Alcoa, they had no choice if they wanted to survive as a company during the worst of the recession.

Lowery added that the other way to look at it is they were trying to preserve the jobs of the 60,000 remaining employees in order to "have a business that would be sustainable moving forward."

Long term, history has shown a lot of companies cutting too deeply can take much longer to recover than counterparts who didn't cut as deeply. Too deep of a cut is usually defined as 20 percent or over of the workforce, which Alcoa was much higher than.

Productivity and earnings are always a benefit of those willing to make the hard decisions in the short term, but it the toll it takes on employees who feel overwhelmed and burned out, can reduce productivity over the long term, and good employees could end up leaving the company.

Short term this is definitely a benefit to Alcoa, but only time will tell if they'll end up being hurt by it once demand significantly returns in the market for aluminum.

Alcoa (NYSE:AA) Declares Quarterly Dividend Again

Alcoa has paid a quarterly dividend to shareholders for over 60 years, and that tradition continued today, as the Board of Directors again declared a dividend for the aluminum producer.

This quarter a dividend of 3 cents a common share was declared for shareholders of record at the close of business on August 6, 2010, which will be payable on August 25, 2010.

A quarterly dividend will also be paid on Alcoa's $3.75 cumulative preferred stock, in that case 93.75 cents a share for shareholders of record at the close of business on September 10, 2010, and payable on October 1, 2010.

Alcoa continues to struggle as aluminum demand remains depressed, although they are projecting about a 10 percent increase in demand going forward.

Will Floating Yuan Help Alcoa's (NYSE:AA) Performance?

Alcoa (NYSE:AA) has probably done about as much as they can in cutting costs and preparing for a turnaround when it comes.

Over the last couple of years, aluminum prices have plunged by about 60 percent, and the shares have dropped to just below $11 a share, from the $30 range.

For better cost controls to compete in that regard, Alcoa is developing a bauxite mine in Brazil. They're spending about $1.5 billion on that project. Some of Alcoa's smaller competitors have been nipping away at their business with better prices, contributing to the overall poor performance of the company, the reason for the bauxite strategy.

Other projects are a large aluminum mining project in Saudi Arabia, and a effort to modernize Russian plants to better serve the domestic market there.

Recently they acquired window and door manufacturer Traco, to diversify their product line.

What could help them the most, is the recent decision by China to allow the yuan or renminbi float more against the U.S. dollar. That could generate more demand from China, although they've been cutting back in some areas to battle rising property prices in urban areas and a possible bubble.

The other problem with the renminbi is it is a potential double-edge sword, which could perform reverse and cause more challenges for Alcoa if that is the case.

If it performs as expected, it could be a good boost for Alcoa in the short term.

The bottom line though is still demand and aluminum prices. Until those elements in the equation change, Alcoa is going to continue struggle, along with its shareholders.

Alcoa (NYSE:AA): Aluminum Supply and Demand

There have been a number of interesting things happening in the aluminum industry, but unfortunately for Alcoa (NYSE:AA) and other producers, when added together it pretty much brings things back to where they were, with growing demand, but an increasing supply to balance it.

This is even with the news the Chinese are cutting back on aluminum production, as high electrical costs are slashing the margins in the industry.

Alcoa's CEO and Chairman Klaus Kleinfeld said he expects aluminum consumption to increase from 10 percent to 12 percent for 2010, a 2 percent increase over his previous estimates (on the high side).

Possibly in the second half some of that aluminum supply may dwindle based on lower prices, and the self-fulfilling prophecy may result in higher prices in the second half.

Some new aluminum ETFs could be a factor going forward as well, but it remains to be seen if they can raise the needed capital to fund the acquisition of aluminum.

The bottom line with aluminum prices seems to be it's as unpredictable as it has been, even with the estimated increase in demand.

Prices will determine the supply as always, and there isn't a lot to generate confidence this will change anytime soon.

Take Alcoa's (NYSE:AA) Performance with a Grain of Salt

It seems everyone is touting the performance of Alcoa (NYSE:AA) as a sign the economic recovery is in full swing, a very dubious assertion and conclusion by those who'll end up eating those words in the future.

This isn't to say Alcoa hasn't done some good things to generate a decent quarter, just that with aluminum prices still down, it was cost-cutting measures which helped them with earnings, not margins.

While that's good for management, it doesn't take care of the demand factor, which is what will drive the prices of aluminum. Until aluminum prices start to rise again, there's not a lot more Alcoa can do but wait things out.

To say the earnings of Alcoa in the latest quarter point toward a recovery can't even been taken seriously in light of aluminum prices. Cutting costs doesn't point to increased demand, no matter what the company and analysts' assert.

Until you see aluminum prices going up, the so-called economic indicator of Alcoa is largely irrelevant.

Alcoa (NYSE:AA) Earnings Report Giving First Look at Real Economic Conditions

Alcoa (NYSE:AA) will report after close today their second quarter earnings, which will give the first look at the condition of the global economy, which is expected to be worse than projected.

Even Alcoa has been downgraded by a number of analysts in anticipation of their quarterly earnings, with expectations far below what had been originally estimated.

Most of this in based on lower aluminum demand, and consequently, aluminum prices, as companies and countries have cut back on spending on raw materials during the quarter.

Earnings per share for the quarter is now expected to come in at about $0.10 to $0.12 a share. Revenue for the quarter is projected to be at $5.05 billion.

Alcoa (NYSE:AA) Losing Confidence of Wall Street

While there is no doubt Alcoa (NYSE:AA) will show some improvement over last year when they release their quarterly numbers on Monday, as the day approaches a number of analysts have downwardly revised earnings forecasts as the price of aluminum continues to fall.

Just since April, when aluminum prices had stood at $2,400 a ton, they have plummeted to close to $2,000 a ton as of Friday.

That's significant because it happened in the third quarter, which will have a strong impact on the performance of Alcoa during that time.

Most analysts had Alcoa's earnings at between 15 cents to 19 cents a share, and that has fallen largely to 10 cents to 12 cents a share recently, with many believing they'll start losing money as the year goes on.

Over the next twelve months or so there isn't a lot of optimism about aluminum prices moving up, and that will mirror how Alcoa performs.

Decision on Alcoa's (NYSE:AA) Hydroelectric Dams Coming Soon

The decision on what to do about Alcoa's (NYSE:AA) bid to renew its federal license to operate four dams in North Carolina will be made sometime this week.

This is a big deal for Alcoa, as it generates about $40 million in revenue annually from managing the dams, and it would be a blow at a time when aluminum demand has fallen, along with aluminum prices.

At this time the attempt by North Carolina to stop Alcoa from being re-licensed looks weakened, as the idea of creating a public trust to manage the Yadkin River, which the dams are located on, doesn't look like it's going to happen.

Alcoa's Bill O'Rourke said this concerning the company's management of the dams, "We believe we've cleaned that up. We're proud of our clean-up record."

Alcoa (NYSE:AA) Lays Off Indiana Workers on Slowing Demand

Demand for aluminum continues to fall, and Alcoa (NYSE:AA) has responded by laying off another 40 workers, this time at their Lafayette, Indiana plant.

The layoffs at the plant will be effective Monday.

Together there will a total loss of 65 jobs though, as another 25 workers were offered a retirement incentive package which they made the decision to accept.

Alcoa spokeswoman Jean Moorman said cutting the jobs were necessary because of declining orders form their customers.