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Alcoa Earnings Beat Consensus By $0.02, Revenues Miss Expectations By $100 Million, Stock Opens Down 1% After Hours

Tyler Durden's picture





 
  • EPS reports adjusted $0.21 on expectation of $0.19
  • Revenues of $5.65 billion miss expectations of $5.75 billion.
  • Sees global aluminium growth rate 12% for 2011
  • Sees global aluminium demand doubling by 2020
  • Q4 Adjusted EBITDA of $782 million, 13.8% margin
  • Q4 CapEx: $365 million
  • Cash on hand of USD 1.5bln at quarter end
  • Improved earnings were driven by higher pricing and continued strengthening in most markets and improved productivity
  • Quarterly results were offset somewhat by a weaker USD and higher energy and raw material costs
  • CEO says expects Chinese demand to slow.
  • Of the 4 segments (Alumina, Primary Metals, Flat-Rolled Products, Engineered Products and Solutions), only Primary Metals posted a sequential increase in ATOI in Q4. The reason: "Improved LME prices,
    volume and productivity were partially offset by unfavorable currency
    and cost increases in energy and carbon product prices. Primary
    production for the quarter increased to 913,000 metric tons, with
    buy/resell activity totaling 70,000 metric tons. The Avilés smelter
    returned to full production this quarter. Adjusted EBITDA per ton
    improved to $436 in the quarter, better than the ten-year historical
    average."

Full press release.

 


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Mon, 01/10/2011 - 17:16 | Link to Comment inkt2002
inkt2002's picture

will be up 10% AH

Mon, 01/10/2011 - 17:38 | Link to Comment Tyler Durden
Tyler Durden's picture

So far down 1%

Mon, 01/10/2011 - 18:22 | Link to Comment Sudden Debt
Sudden Debt's picture

Non ferrous metals are up 11% this last Q.

Also, wages in the metal sector in the EU are up 4,7% since 1 jan.

This is killing the metal industry as we speak.

And for Alcoa, hard times are coming because all wholesalers have filled their warehouses to the roof on expected commodity spikes.

A second problem is that in december, production plummeted in the EU.

Another one to watch is Arcelor Mittal, they are kicking up production at raiser sharp margins to take market share at whatever the cost because volume is the only thing that can keep their furnaces working.

SO: higher commodity prices & lower margins on steel rolls.

Mon, 01/10/2011 - 17:21 | Link to Comment HarryWanger
HarryWanger's picture

Hard to argue the growth story now with aluminum demand up so much. And, even more important, the outlook for the year is very strong. This is an excellent report and gives us an early insight into the strength the economy witnessed in late 2010 and how it will continue into 2011.

Mon, 01/10/2011 - 17:25 | Link to Comment 101 years and c...
101 years and counting's picture

Excellent news.  That means, after tomorrow's POMO (last POMO on current schedule), the Fed will stop monetizing debt. 

Mon, 01/10/2011 - 17:29 | Link to Comment inkt2002
inkt2002's picture

Irrelevant. POMO is just stablizing the currency market.  With or without POMO, the market is incredibly undervalued. 

Mon, 01/10/2011 - 17:43 | Link to Comment Bill Lumbergh
Bill Lumbergh's picture

Please tell me what you are smoking so I can head out in this wintry weather to also have some for the BCS game.

http://dshort.com/articles/three-valuation-indicators.html

Mon, 01/10/2011 - 17:47 | Link to Comment inkt2002
inkt2002's picture

Foward earnings are being vastly underestimated.  Coupled with most earnings estimates are agnostic to money supply changes makes these metrics obsolute.  The fair value on the S&P is 1588.

Mon, 01/10/2011 - 17:50 | Link to Comment Bill Lumbergh
Bill Lumbergh's picture

All metrics are meaningless except the ones you decide to use to formulate S&P fair value of 1,588.

Mon, 01/10/2011 - 17:54 | Link to Comment inkt2002
inkt2002's picture

I respect many metrics.  Abby Joseph Cohen tweaked her valuation model a couple of years back and has been spot on of late.  Her metrics should not be ingnored.  My metrics had targeted the SPX for January 2011 at 1250 two years ago when it was trading at 850.

Mon, 01/10/2011 - 18:17 | Link to Comment inkt2002
inkt2002's picture

I said she tweaked her model two years ago.  She has been spot on since them.

Mon, 01/10/2011 - 18:26 | Link to Comment Bill Lumbergh
Bill Lumbergh's picture

With a bullish MO over the course of her career how can she not be correct over the past 2 years.

Mon, 01/10/2011 - 18:26 | Link to Comment Tyler Durden
Tyler Durden's picture

"Tweaked" after she ended up being off 100% in her market forecast?

Mon, 01/10/2011 - 18:38 | Link to Comment inkt2002
inkt2002's picture

Point well take Tyler.  But there is no denying Cohen is a master at implementing Bayesian priors into her model.  Hard to argue her pinpoint accuracy the last couple of years and the liklihood of this accuracy to continue going forward. 

Mon, 01/10/2011 - 20:18 | Link to Comment Hedge Jobs
Hedge Jobs's picture

inkt"2002" i take it that is the year you were born?

Mon, 01/10/2011 - 20:39 | Link to Comment Tyler Durden
Tyler Durden's picture

Actually it is not hard to argue it at all

Mon, 01/10/2011 - 17:26 | Link to Comment inkt2002
inkt2002's picture

Aluminium growth rate has the highest correlation to GDP growth rate than any other entity.  Would not be surpised to see a 4.5 to 5% print on GDP this year, which would make the SPX fair value 1588.

Mon, 01/10/2011 - 17:40 | Link to Comment HarryWanger
HarryWanger's picture

You might be correct. I'm not so bullish on my SPX number but do think 1400 is a given this year. This report is showing strong demand and, as you stated, that will translate nicely to GDP.

Mon, 01/10/2011 - 19:35 | Link to Comment Rainman
Rainman's picture

....you are spot on the 14 handle...... as long as the financials can keep the mark to market con going for another 11 months, 3 weeks. I'd do an all-in if I were you, amigo.

Mon, 01/10/2011 - 17:44 | Link to Comment Bill Lumbergh
Bill Lumbergh's picture

I have not run the numbers but I do not recall there being a term "Dr. Aluminum".

Mon, 01/10/2011 - 17:34 | Link to Comment Cursive
Cursive's picture

@wanger Go back to grading papers. Top line is harder to cook than EPS. AA admits China is slowing and we're supposed to believe that India and Vietnam will more than pick up the slack? Only in Cramerica.

Mon, 01/10/2011 - 18:10 | Link to Comment Dismal Scientist
Dismal Scientist's picture

Don't be a knob, Harry. Equity markets are going to have to face up to rising interest rates over the next few years, that will compress rather than expand PE multiples. Its been so long since equities faced a flattening yield curve via the short end, let alone inverted, that you've forgotten the impact on equities.

Mon, 01/10/2011 - 17:26 | Link to Comment lsbumblebee
lsbumblebee's picture

"Alcoa contributed these strong numbers to consumers buying aluminum foil in bulk, for use as barter during the coming Armageddon."

-MarketWatch

Mon, 01/10/2011 - 17:27 | Link to Comment kornholio
kornholio's picture

buy the fucking dip, aa is one of the biggest polluters on this planet

Mon, 01/10/2011 - 17:27 | Link to Comment Aknownymouse
Aknownymouse's picture

see you below $12 Harry...

Mon, 01/10/2011 - 17:34 | Link to Comment plocequ1
plocequ1's picture

Way to go AA. That Aluminum on my Macbook pro is a beautiful thing. Keep up the great work

Mon, 01/10/2011 - 17:35 | Link to Comment belogical
belogical's picture

I know it's earning season and all but did anyone see this? What do we make of it?

 

http://gata.org/node/9496

Mon, 01/10/2011 - 17:45 | Link to Comment shushup
shushup's picture

belogical - very interesting. I also liked the Ron Paul statement. IT's time the FED had some real oversight.

Mon, 01/10/2011 - 17:46 | Link to Comment ReallySparky
ReallySparky's picture

Good find.  Wonder what will happen.

Mon, 01/10/2011 - 17:39 | Link to Comment tunaman4u2
tunaman4u2's picture

Bulls are even on Zerohedge now...

AA is going do triple the prices & have double the demand in 2020? 

Whats the PE on AA now? 

 

Mon, 01/10/2011 - 17:46 | Link to Comment Racer
Racer's picture

And just think if everyone had the power to look and predict TEN years into the future....

Shame Greenpants and ZimBen can't even see in front of their noses

Mon, 01/10/2011 - 17:42 | Link to Comment HarryWanger
HarryWanger's picture

Looking at a forward p/e around 14. With growth at 12% this year and doubling by 2020, I'd say this is an excellent long term play right here.

Mon, 01/10/2011 - 17:46 | Link to Comment tunaman4u2
tunaman4u2's picture

I'll give you its better than paper dollars but thats it. The demand NOW is due to HUGE debt & money printing, if you want demand to double by 2020 whats your target for the deficit & printing then? 
By 2020 grocery bills will be $1500 per week IF demand doubles for aluminum in 2020. 
Won't be good for the economy or society but for the select few. 

Long term play... On a long enough time scale the survival rate for everyone is ZERO

Mon, 01/10/2011 - 18:19 | Link to Comment erik
erik's picture

Linear extrapolation at its finest

Mon, 01/10/2011 - 20:59 | Link to Comment unununium
unununium's picture

I like AA but I think I'll wait for the 50% off sale.

Mon, 01/10/2011 - 17:45 | Link to Comment goldmiddelfinger
goldmiddelfinger's picture

Sell all gold bullion. Buy aluminum siding in bulk.

 

Mon, 01/10/2011 - 17:58 | Link to Comment kornholio
kornholio's picture

i am going to start crushing my beer cans and selling them to wanger...

Mon, 01/10/2011 - 23:16 | Link to Comment Cookie
Cookie's picture

LOL...here in rural Thailand we have a guy who comes by once a month on a motorcycle with sidecar and buys all our aluminium, glass, paper and plastic.....and the prices he pays are going up!

Mon, 01/10/2011 - 17:47 | Link to Comment Astute Investor
Astute Investor's picture
  • Sees global aluminium growth rate 12% for 2011
  • Sees global aluminium demand doubling by 2020

Implies annual growth of 6.65% from 2012-2020.  Not gonna happen...

Mon, 01/10/2011 - 17:51 | Link to Comment hejss
hejss's picture

Double? What planet are they talking about? Oil production won´t be enough for once.

Maybe they expect aliens to deliver future resources so the exponential curve can continue straight up to infinity. 

Mon, 01/10/2011 - 17:56 | Link to Comment 101 years and c...
101 years and counting's picture

based on the quadrupling of the Fed balance sheet.  oops, already happened.

Mon, 01/10/2011 - 18:00 | Link to Comment DoctoRx
DoctoRx's picture

To all the HarryW-type bulls - this is a banana peel market.  AAPL is about the only stock with any value I can see- and it's hardly cheap.  If you're the Feds, you should care more about remaining a going concern rather than whether the ES is at one level or down 90% eventually.  That's in essence the decision the Japanese authorities have been making.  If it takes terrifying the sheeple to allot capital to stocks w q and CAPE at near record levels, that leaves bonds as one alternative.  And if matters go the other way w Treasury prices collapsing, all you need is gold/Ag etc.   

Mon, 01/10/2011 - 18:10 | Link to Comment H H Henry P P P...
H H Henry P P P Paulson's picture

L-L-Looks like the e-e-economy is growing.  Th-th-th-th-th-that means the marketttts s-s-should drop for no r-reason.

Mon, 01/10/2011 - 18:11 | Link to Comment onlymyopinion
onlymyopinion's picture

Woah, AA beating that much bodes well IMO for the overall strength of what Q4 earnings will bring.  A lil' icing is their strong guidance too.  Q4 could prove to be the best in 2 years.  Must remind self----buy.more.dips.

Mon, 01/10/2011 - 18:34 | Link to Comment optimator
optimator's picture
One of the ways companies like Alcoa make money is to stockpile years of raw product when they know that product is rising.  25 years ago I called on a copper producer, and on one visit the parking lot was piled high with slabs of copper.  It was then that my contact explained it to me.
Mon, 01/10/2011 - 19:57 | Link to Comment UGrev
UGrev's picture

Alcoa.. wow. I used to work at one of their plants after I got out of college and looking for a job in my field. If you have a brain in your head, you would drop any investments with them like they were herpes. The unions run ALCOA, plain and simple. The unions have STOLEN pensions and PROMISED packages to management for years and they strike like a bunch of pussy, fuck-face, whine-ass, sissy-mary's when they don't get what they want, see 1993ish strike in Massena, NY. They set up road blocks and set fire to tires. Some even brought rifles and were firing.

So now ALCOA pussied out and won't grow a fucking pair enough to tell the unions, which analy rape ALCOA on a regular basis and even loss prevention is in on it, to sit on it and rotate. So YOU and I are stuck with higher prices because the guys in the pot rooms think a laborious job such as theirs is worth 75k a year +OT, paid vacations and other crazy benefits. It takes about .001% of brain power to learn the job and nothing short of practice to get it right. Any one who actually comes in, learns the job and finishes their job in the 8 hours period is actually shunned and , for lack of a better term, THREATENED to slow it down so he doesn't make the old fuckers look bad so the old fuckers can continue their thievery. 

Mon, 01/10/2011 - 21:32 | Link to Comment Founders Keeper
Founders Keeper's picture

Derivatives are off-book and FASB is suspended. I don't trust any quarterly earnings reports.

I also assume all US mega corporations, such as Alcoa, are "guided" by officials of the US govt. I'm trying to think...of a US agency...that needs lots of aluminum...hmmm.

 

Mon, 01/10/2011 - 23:26 | Link to Comment Spaceman Spiff
Spaceman Spiff's picture

How many times did they revise down this past week/month?

Mon, 01/10/2011 - 23:36 | Link to Comment Drag Racer
Drag Racer's picture

Alcoa expansion plans are stalled in Iceland and the geothermal plant is offline until 2012 which was just purchased by Australia's Wasabi Energy.

http://thebull.com.au/articles/a/16796-australia%27s-wasabi-energy-buys-...

 

China showing interest...

http://www.savingiceland.org/tag/husavik-energy/

 

...telling the American ambassador in Iceland how they are “bending all the rules, just for this”... (enviromental concerns)

http://www.savingiceland.org/tag/alcoa/

 

Aluminium smelting is the most important power-intensive industry in Iceland. There are currently three plants in operation, with one under construction and two in the planning stage.

http://en.wikipedia.org/wiki/Economy_of_Iceland

 

If Alcoa's plans to expand are realized and they can keep China at bay, expect production to increase out of the area in 2 years boosting profits but filling some supply needs. If there is a demand gap in 2 years... (don't hold your breath on GM demand though)

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