Aluminum giant Alcoa (AA)
, a bellwether for manufacturing, is tied to a skittish commodity price: aluminum. The metal’s price plummeted over 27 percent last year, after peaking in April. Analysts’ opinions on Alcoa’s 2012 prospects now vary widely as the world economic picture dims.
Alcoa operates in highly cyclical markets such as construction. Its aluminum also is used in airplanes, cars, commercial vehicles and pipes for the oil and gas industry. In 2010, Alcoa’s slice of the world’s aluminum market was 14.8 percent, and competition is intense.
As a global company, Alcoa gets half its sales from the U.S. and another 27 percent from Europe.
Fourth-quarter 2011 sales rose to $6 billion, up 6 percent from $5.7 billion in 2010. Net income declined to 18 cents per share, compared to a gain of 24 cents per share, due to restructuring charges. Full year earnings were 55 cents, versus 24 cents in 2010.
For 2012, the Wall Street consensus earnings estimate is 62 cents per share.
Alcoa expects global aluminum sales to rise 7 percent this year, driven by supply shortages. Demand will also be strong in aerospace and automotive industries, said the company.
Sales are slated to rise 20 percent in China. But Alcoa is aggressively reducing costs, slashing 12 percent of its global capacity.
Analysts are split on Alcoa’s 2012 prospects, though. Of the 20 analysts followed by Thomson/First Call, six have strong buy recommendations and four have buys, with eight holds, two underperforms and one sell.
S&P analysts have a buy rating and a $13 price target, though. They cite an attractive valuation and higher 2012 earnings.
The company reports next on April 10.
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