Alcoa Inc. (NYSE:AA), the largest aluminum manufacturer in the United States, did not help boost the confidence of investors. Instead the company signaled caution, despite the fact that its second quarter earnings report exceeds the expectations of Wall Street analysts.
The company kicked off the earnings season Monday with earnings of 6 cents per share excluding one-time special items, or $61 million. Without the one time items, Alcoa posted a net loss of $2 million (break-even or 0 cents per share). Wall Street analysts expected the company to report 5 cents earnings per share. The growth is tepid, but Alcoa managed to beat Wall Street expectation. However compared with its 32 cents earnings last year, the number is significantly lower. Already, guidance for Q3 earnings are being revised lower. Alcoa EPS was expected to earn $0.18 a share three months ago, today the expectation is for only $0.10 a share. Estimates for Q4 and 2013, have also decreased for the aluminum giant.
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During the same period last year, the company reported a net income of $322 million (28 cents per share). Its revenue declined by 10% from $6.59 billion in the previous quarter to the current level of $5.96 billion.
Klaus Kleinfeld, Chairman and CEO of the company remains confident that Alcoa was able to maintain its revenue strength despite weak aluminum prices and the sluggish economic situation worldwide. According to him, “Although aluminum prices are down, the fundamentals of the aluminum market remain sound with a strong demand and tight supply, Alcoa Inc. (NYSE:AA) is successfully capitalizing on accelerating demand in high-growth end markets such as aerospace and automotive.”
The company tried its best to maintain to enhance its profitability by pushing its mid and downstream business, improving its upstream business and reducing its expenditures.
Klaus expression of confidence and assurance is not enough to bolster excitement among investors. In fact, many are disappointed, and it seems that its second quarter earnings report set a stage of fading optimism.
According to Factset, analysts lowered their earnings per share (EPS) estimate for S&P 500 (INDEXSP:.INX) companies for the second quarter of 2012 from $26.50 in January, to $25.13. The projected growth rate was lowered from December last years’ 8.7% to 3.0%.
For the third and fourth quarter of 2012, analysts previous EPS estimate were $27.24 and $28.29 respectively. S&P500 EPS estimates were also reduced to $26.27 (Q3) and $27.86 (Q4) from $27.24 (Q3) and $28.29 (Q4) from the end of 2011. The projected growth for Q3 and Q4 fell from 6% to 2 % and 16.1% to 13.9% respectively.
Alcoa’s earnings report resulted in a dismal outlook among investors. Even if the majority of the investors are willing to take risks, uncertainties increases due to the instability of the global economy.
Reflecting this fears, Alcoa was down over 4% today. Additionally, the S&P 500 was down 0.80% as investors fear a weak earnings season, coupled with weak growth in China and Europe.