U.S. stocks: Alcoa’s earnings rise with aluminum prices

Alcoa Inc., symbol AA on New York, is one of the world’s largest aluminum producers. The U.S. stock’s customers are mainly in the aerospace, automotive, construction and beverage industries. Alcoa operates in 31 countries. In the three months ended March 31, 2011, the U.S. stock’s sales rose 21.9 %, to $6.0 billion from $4.9 billion a year earlier. Even so, the latest sales fell short of the consensus estimate of $6.1 billion. Alcoa earned $309 million, or $0.27 a share. If you exclude unusual items, such as costs to integrate firms Alcoa recently bought, it would have earned $0.28 a share. On that basis, the U.S. stock’s latest earnings beat the consensus estimate of $0.27 a share. A year earlier, Alcoa lost $194 million, or $0.19 a share. Higher aluminum prices (up 15.1%) and production (up 1.7%) were the main reasons for the gains. That helped offset higher costs for energy and raw materials, and costs to settle a labour dispute in Australia. Aluminum demand will likely continue rising as more citizens of fast-growing countries like China, India and Brazil move from rural to urban areas. That will increase the need for construction materials. Alcoa expects global aluminum demand to rise 12% in 2011. That should push up its 2011 earnings to $1.41 a share from $0.25 a share in 2010. The stock trades at a just 11.7 times that estimate. If you’re interested in investing in U.S. stocks like Alcoa, you should subscribe to Wall Street Stock Forecaster. What’s more, you can get one month free when you subscribe today. Click here to learn how.

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Jim Bates

Jim is an associate editor at TSI Network. He is the lead reporter and analyst for The Successful Investor and Wall Street Stock Forecaster and a member of the Investment Planning Committee. Jim has held the Chartered Financial Analyst designation since 1992 and spent more than a decade at the Financial Post DataGroup before joining TSI Network. He has a Bachelor of Commerce degree from the University of Toronto.

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