Alcoa investors bracing for earnings hit

Tag : aluminum profile

NEW YORK (Reuters) - Investors in Alcoa Inc (AA.N: Quote , Profile , Research , Stock Buzz ) are expecting a rough quarterly earnings report on Tuesday fromthe aluminum maker, whose profits are expected to sink nearly 20percent as escalating energy and other costs take their toll.
Aluminum prices should prove to be a bright spot, although themarket will be closely eyeing Alcoa's margins to see how much ofthe increased costs for energy and materials, such as caustic soda,the company has managed to pass along to its customers.
"I think that this quarter's going to be pretty mundane. The trendsthat were in place in the first quarter are going to still bethere," said Charlie Smith, chief investment officer at Fort PittCapital Group, which owns about $10 million of Alcoa shares.
Analysts are expecting Alcoa's income from continuing operations toslide to 66 cents per share from 81 cents a year earlier, accordingto Reuters Estimates.
That forecast is also about 8 percent lower than the 72 cents pershare analysts had predicted in mid-June.
Alcoa had said on June 10 that an explosion at a gas supply plantin Australia would trim its second-quarter earnings by 2 to 3 centsper share.
Surging energy costs, a weak U.S. dollar and worries about thehealth of Alcoa's major customers will be in focus as the marketdigests the first earnings report of the quarter from a componentof the Dow Jones industrial average.
"The bigger worry for me is really the trends in the auto industryand the aerospace industry given that two major end-markets foraluminum are really under assault right now," said Scott Burns,analyst at Morningstar.
"Even though airlines need to switch to more fuel efficientairplanes, they simply won't be able to if they don't have anymoney. The woes in the automotive sector are pretty clear .... So Ido think in the short-term for Alcoa it's going to be tough," headded. Continued...