Stock of the Day
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Alcoa, Inc. (AA)
Alcoa Revenue Up 14 %
Pittsburgh, Pa.-based Alcoa Inc., the world's largest aluminum manufacturer and the first company in the Dow Jones industrial average to report results, announced that second-quarter profit increased as revenue went up 14 percent. Net income was $460 million, or 52 cents a share, compared with $404 million, or 46 cents a share in the same quarter a year earlier. Revenue rose to $6.8 billion from $6.1 billion last year, since the demand and prices of aluminum remained high.
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Shares of Alcoa Inc. rose Friday after the Alcoa Inc. reported its highest revenue in company history, with sales growth influenced by higher quantity and the purchase of fabricating facilities in Russia. According to a company's spokesman, "a record performance by the alumina business, a better mix of value-added fabricated products, coupled with stronger pricing and demand in the aerospace, commercial vehicle and building markets also drove revenues higher." These promising results were further strengthened by Alcoa's sale of its shares in a Norwegian metals business and tax benefits. Accordingly, the company recorded a second-quarter after-tax profit of $219 million on the sale of its shares in the Norwegian metals company Elkem and also received $120 million in tax benefits. "We achieved the highest quarterly income and revenues in Alcoa history," stated Chairman and CEO Alain Belda proudly. "We delivered strong results and took necessary steps to restructure, control costs, and lay the framework for solid performance over the long term."
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These pleasing results come after a number of disappointing quarters and confirm that Alcoa management's aggressive cost-reducing efforts are effective. Besides, the yearlong consistent restructuring program focused on cutting costs and tailoring Alcoa's operations to better suit areas with weaker demand, such as in Europe and in the North American auto sector. As part of an on-going effort, Alcoa stated on June 23 that it will eliminate about 6,500 jobs over the next 12 months in the second phase of its restructuring process, which will eliminate a total of 8,100 positions. Belda believes that this "restructuring program will help further position the company to eliminate costs and place it in a stronger position."
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In early trading Friday, shares of Alcoa rose 92 cents or 3.5%, to $27.01 on the New York Stock Exchange. Although the company gave no outlook for the rest of the year, Belda told analysts that he supposes the market for aluminum to remain in deficit for the rest of the year and through 2006 and 2007. It will be interesting to see if the cost-saving methods by Alcoa will also produce satisfying third quarter results. It is surely a stock to watch over the next few weeks and months.
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Profile |
Alcoa Inc. is one of the world's leading producers of primary aluminum, fabricated aluminum and alumina and a major participant in all segments of the industry: mining, refining, smelting, fabricating and recycling. Alcoa serves customers worldwide primarily in the packaging, transportation (including aerospace, automotive, rail and shipping), building and industrial markets with a great variety of fabricated and finished products.
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