Alcoa Leads Off with Improvement

So here we go again.

Alcoa (AA), the perennial lead-off company for earnings season, reported third-quarter earnings per share and revenue that improved from last year, while also raising its aluminum consumption forecast for the year.

The company earned 9 cents per share, excluding a negative impact of 3 cents, which was ahead of the Zacks Consensus Estimate by 3 cents and better than last year’s 4 cents. Revenues reached $5.3 billion, or a 15% improvement from $4.6 billion in the third quarter of 2009 and 2% better than the second quarter of 2010.

But Alcoa is closely tied to the price and consumption of aluminum, so the best news of the report may be that the company raised its aluminum consumption forecast for 2010 to 13% from 12%, citing strengthening markets.

It should come as no surprise that the developing markets are eating up this light and strong metal. Among the hot spots are China, Brazil, India and Russia.

After hours shares have moved up by approximately 3%.

Analysts were not that excited heading into the report, and that’s putting it mildly. Out of 16 total estimates for this year, there had been 7 downward revisions in the past 30 days and only 3 to the upside. There had also been 2 lowered revisions in the past 7 days, against a single revision upward. (See our full blog post dedicated to this: “Earnings Preview: Alcoa, Inc.“) As a result, the Zacks Consensus Estimate for 2010 is 45 cents per share, which is down 3 cents in the past month and 13 cents from 3 months ago.

There hasn’t been that much activity for next year, as the Zacks Consensus Estimate of 98 cents is off only a penny in 30 days and 3 cents in 3 months. However, analysts do expect earnings growth of more than 117% in 2011 over 2010.

Will today’s report make any difference when it comes to earnings estimates? If so, it might help the company break out of its Zacks #3 Rank (Hold).

We upgraded the company to a longer-term Neutral recommendation from Underperform after solid second-quarter results in July. We’ll have to wait and see if this recommendation will hold, but there’s a good likelihood that it will.

Want more Alcoa news? We’ll have more in-depth coverage coming up.

By Jim Giaquinto

ALCOA INC (AA): Free Stock Analysis Report

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