Lower costs improve Alcoa’s outlook

Article Excerpt

ALCOA INC. $32 (New York symbol AA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 867.7 million; Market cap: $27.8 billion; WSSF Rating: Above average) has stayed in a narrow range in the past year. While aluminum prices have moved up nearly 20%, Alcoa’s high-cost smelters have cut into its profit margins. Alcoa has steadily replaced its older facilities with new, more energy efficient ones. It has also sold some of its less-profitable operations. These moves are starting to pay off. In the fourth quarter of 2006, earnings before one-time items jumped to $0.74 a share from $0.26 a year earlier. Sales rose 20.0%, to $7.8 billion from $6.5 billion. Aluminum demand should remain strong in 2007, thanks to spreading industrialization in Asia and the recovery of the commercial airplane industry. Thanks to its improving outlook, Alcoa plans to buy back 10% of its stock in the next three years. It has also raised its quarterly dividend 13.3%, from $0.15 a share to…

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