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Tuesday, October 10, 2006

Alcoa Earnings Miss Spilling to Other Metal Stocks

Alcoa (AA) is trading down 6.3% in after-hours trading at $26.48, and that is after closing up 1% at $28.29 in regular trading. Shares had been down over 7% from the close but have since caught some light bids. The 52-week trading range is $22.28 to $36.96. Its two-year lows are around $23.00.

Alcoa reported earnings were up some 85%, but sales were light. Its EPS were $0.61 on revenues of $7.63 Billion versus estimates of $0.77 and $7.75 Billion respectively.

"In July, we said the third quarter would be solid, but would reflect the traditional seasonal slow-down and lower metal prices. In fact, the quarter was the third best in company history even though metal prices on the London Metal Exchange declined 6%," said Alain Belda, Alcoa's chairman and CEO.

They did note a weak North American auto market and housing constructions slowing and even said the markets are softening.

So far this is hurting the overall aluminum sector, and based on the weakness you have to wonder if its comments will hurt copper and steel producers.

Other aluminum stocks are off with it in after-hours: Alcan (AL) is down 3.4%, Novelis (NVL) n/t, Quanex (NX) n/t, and Century Aluminum (CENX) is down 2.2%.

US Steel (X) is down 1.3% after-hours, but that is after closing up 1.5% on the day. Reliance Steel & Aluminum (RS) n/t.

Phelps Dodge (PD) is down 1.3% after-hours, but that is only a portion of its 2.5% gain on the day. Southern Peru Copper (PCU) down 1.4% after-hours, but that is after a 1.5% gain on the day. Freeport McMoran Copper & Gold is down 0.35% in after-hours trading, but it traded up 1.19% on the day.

Alcoa is a company that seems to be in a perpetual turnaround, so we'll see how much was really priced in tomorrow morning. Because of this it may be too soon to say that since Alcoa was weak we should expect the same from all the other metals stocks in earnings season. Alcoa is the first of the basic commodity and metals stocks to announce earnings for calendar Q3 earnings seaon.

Jon C. Ogg
October 10, 2006

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