ALCOA Earnings Shell Game… Weak Currency, Energy Costs & Weak Industrial Demand (AA)

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ALCOA Inc. (NYSE: AA) gave a strange earnings report today.  The aluminum giant gave $0.37 EPS on $7.4 Billion in revenues. First Call had this quarter estimates at $0.48 EPS and $7.2 Billion.  To show how different 2008 is from 2007, this compares to $0.75 EPS and $7.9 Billion during the same quarter last year.

Currency took off $0.08 from EPS according to the company.  The first note we’d make there is that this is one massive currency charge and we’d probably want to hear a better explanation than this.

You’d never know this was a metals play in this environment, mainly because much of their benefit is finished products and it has to import so much back into the U.S.  The weak dollar, poor industrial demand and well-above plan energy costs are all listed as culprits (get used to those three excuses this earnings season).

Shares closed down 4% at $37.44 despite the Goldman Sachs team getting more positive right ahead of earnings this morning.  Its 52-week trading range was $26.69 to $48.77.  Shares were halted on the news.

As a reminder, ALCOA did recently close on a sale of packaging/consumer operations.  That may make at least some of the operational comparisons harder to make.

Jon C. Ogg
April 7, 2008