Istock Analyst reported that the world's biggest aluminum maker Alcoa is set to kick start the much awaited earnings season on July 9th 2012. Investors and analysts are keenly watching the earnings season to rekindle interest in the stock market that has witnessed somewhat lukewarm or lackluster trading in the second quarter after a solid gain in the Q1.
The company announced a profit for the Q1 surprising the market that was expecting a loss. This was partly due to Alcoa's focus on its midstream and downstream businesses besides cutting down costs on its upstream business. The company earned 10 cents a share on revenues of USD 6.01 billion for the Q1 whereas analysts were expecting the company to suffer a loss of 4 cents a share on revenues of USD 5.77 billion.
Just ahead of the Q4 and Q1, Alcoa announced a cut in its production plan to reduce supply for better price stabilization. However, this seems to have not paid dividends at least during the second quarter. This is because aluminum's price movement in the London Metal Exchange is not at all encouraging. Aluminum price in the cash market slipped to a little over USD 1800 million tonne at the end of June from a little less than USD 2100 million tonne in April. Most of the downside was witnessed in June.
Data from World Bureau of Metal Statistics indicated that looking at the worldwide usage of Aluminum, Asia tops the list with over 40% of consumption. This is followed by Europe with approximately 24% and the Americas with approximately 22%. But all these markets are down in the present condition.
With European Union also ruled out to contribute anything significant to offset weakness, Alcoa had to look towards the Americas. The transport sector helped. The automotive and aerospace sectors may offer hope to some extent but this may again be insufficient to ward off any overall sluggishness in aluminum market due to oversupply.
The hopes of the aluminum market turning brighter from the second quarter seem to have vanished. This is quite evident as Wall Street analysts' have reduced their earnings estimates on Alcoa by half to 6 cents a share for the Q2 from 12 cents a share three months back.
Revenue is predicted to be USD 5.83 billion which is lower than the Q2's USD 6.01 billion and last year Q2's USD 6.58 billion. In the last Q4 the company's earnings failed to meet consensus only once and met with expectations twice and topped once.
If the Q1 is an indication, Alcoa's product mix could help earnings bypass street expectations. Whether it can continue to drive in the remaining quarters remains to be addressed by the company. The aluminum industry is continued to reel under oversupply concern and this is expected to remain a thorn in the remaining quarter too.
Source - Istockanalyst.com
(www.steelguru.com)
