Alcoa Earnings Review

On CNBC: Alcoa Shares Jump as Results Top Expectations

• Alcoa reported another quarterly loss Wednesday as aluminum demand remained weak and the price of the metal was depressed, but the shortfall was narrower than analysts expected. The company's sales exceeded forecasts as well.
  
  Shares of the aluminum giant jumped in extended trading Wednesday....

Beat expectations?

And for the record this is Alcoa's third quarterly losses in a row.

And the shares jumped in extended trading.

Also from same CNBC article.

• The aluminum giant reported a loss of 26 cents a share in the second quarter, excluding one-time charges, compared with earnings of 66 cents a share in the same period last year.
  
  The company reported a topline of $4.2 billion, compared with sales of $7.62 billion this time last year. The most recent results were hurt as metal prices and the auto industry have slumped and global demand has fallen during the economic downturn.
• In response to the tough times, Alcoa—the first member of the Dow Jones Industrial Average to report—has cut thousands of jobs, slashed its dividend, trimmed spending and raised $1.3 billion to help it through the slowdown.

No monetary figure on how much Alcoa lost?

On Finance.Yahoo.com Alcoa posts 2Q loss of $454M on weak demand

Some passages from that article.

• Alcoa Inc. unofficially opened the earnings season by posting a narrower-than-expected loss of $454 million, citing continued weak prices and demand for its aluminum products amid the global
  recession.
• Alcoa executives credited the results, which exceeded Wall Street projections and moved its stock higher in after-hours trading, to the company's efforts to slash costs and conserve cash in recent months. They pointed to signs that some aluminum markets may be stabilizing, but reiterated an earlier estimate that the aluminum industry will shrink 7 percent this year.
  
  It was Alcoa's third straight quarterly loss and fresh evidence of slumping orders from key customers in the aerospace, automotive and construction industries. Aluminum makers have struggled since last year with sharply lower orders for the metal used in products ranging from beer cans to jumbo jets.
  
  The weaker demand has driven up stockpiles and depressed prices of the metal, and many aluminum makers have responded by curbing production. Analysts say demand is picking up, but excess supplies will keep prices relatively low in the months ahead.

' .... weaker demand has driven up stockpiles...' ? Hmmmm....

Now on wsj article Alcoa's Earnings

• Hopes for an economic rebound have pushed aluminum prices up 24% in the past few months, while Alcoa shares have rallied roughly 80%.
• Still, much of the recent demand for aluminum and other metals has been due to China restocking industrial supplies in the first half of the year. That process may be winding down, and commodities might soon need longer-lasting sources of demand to keep climbing higher.

Restocking industrial supplies? Or as Andy Xie Calls It Speculative Inventory And NOT Commodity Stockpiling!

Now I just remembered reading a blog entry yesterday from Macro Man called Remarkable!. I was 'amazed' by the chart posted.

• So after China, a country with a considerable aluminum manufacturing capacity running well below max capacity, starts a fairly-clearly-impossible-to-maintain run of aluminum imports like this:
  
  

Would one call the above chart as plain restocking? Or perhaps Andy Xie has been so spot on?

Anyway the wsj article continues...

• Even then, aluminum's long-term prospects are among the rockiest of all commodities. UBS analysts recently raised their price forecasts for a wide range of metals, from lead to gold. The only metal for which UBS cut its estimates for both 2010 and 2011 was aluminum.
  
  The big problem for aluminum is that there is far too much of it. Rising inventories have been a problem for most commodities, but especially for aluminum, which has more global production capacity than most any other metal. That production hasn't been cut nearly enough to match declining demand. Deutsche Bank analysts expect production of 36.7 million metric tons this year, compared with demand of about 35 million tons. Demand and supply are more closely in balance for copper, zinc and other metals.
  
  Total aluminum inventories were up 165% from a year ago in May to 17 weeks' worth of demand, according to Bank of America Securities-Merrill Lynch analysts, compared with a long-term average of 7.5 weeks.
  
  The world will need to make a lot of cars and beer cans to close that gap. Until then, aluminum might lag behind other commodities.

Aluminium inventories up 165%????

LOL!

Inventory bubble eh?

Anyway back to Alcoa.

Let's see what we have...

1. The stock had already rallied some 80% since the lows....
2. The 'better than expected earnings' should really read 'LOST LESS MONEY than expected.
3. Company trimming dividends
4. Shares used to between 30.00 to 40.00. It's now still less than 10.00. Value for money?

Chart on Alcoa.