Boston, MA 10/14/2013 (wallstreetpr) – Earlier last week, Alcoa Inc (NYSE:AA), posted its third quarter earnings which were above the market expectations of 5 cents earnings per share. Despite of a marginal drop in sales, reported at $5.77 billion, the company’s earnings rose to $120 million i.e. 11 cents of earnings per share from $32 million or 3 cents per share, excluding restructuring charges and other special items. The company also recorded after-tax operating income (ATOI) of $338 million, an increase of 11% compared to the previous quarter.The company’s better than expected earnings are primarilya result of its effort in reducing cost and increase in market demand in aerospace segment, but the company still has a long way to go before it could start getting positive free cash flows.
Alcoa Inc. is among the largest producer of primary and fabricated aluminium. Alcoa’s products are highly used across the industries involved in aircraft,oil and gas, defense, consumer electronics, automobiles, commercial transportation, packaging, building and construction and industrial applications. In spite of being a fair performer in its third quarter, Alcoa is still vulnerable to some of the challenges in the business it operates in. One of the largest factors fuelling this concern is the surmounting pressure on Aluminium prices due to supply exceeding the demand. This fact can further be strengthened on the Alcoa’s own upside revision of its inventory surplus to 636,000 tons. All this can be summed upto a negative hope that the aluminium prices are likely to ease in the near term.
If Barclay’s estimates are to be considered,then the current aluminium inventory is stocked up to more than 80%, above the historical averagewhich suggests that pressure could continue for the upcoming days. On a final note, Alcoa has a huge potential for an upside if the Aluminiumprices either soar due to limited supply or meet a phenomenal demand, until then the company is expected to be in trouble.
