×

Pisani: Little Joy in Alcoa Report, No Demand Improvement

If you're looking for turnaround in aluminum demand, you didn't hear it from Alcoa, other than a feeble comment that demand is "gradually improving."

Alcoa LOST $0.19 a share, but in the topsy-turvey world we live in, Alcoa says that $0.13 in restructuring charges related to the closing of two smelters should be considered a non-recurring item (this company has been restructuring for YEARS). Combine that with other tax items and special charges, and the $0.19 loss turns into a $0.10 gain, in line with expectations.

The core of Alcoa's problem was stated right at the top of its earnings release: "higher realized prices offset by...lower shipments."

Primary metal production declined 8 percent. Can sheet shipments declined. Continued weakness in building and construction business.

Revenues were DOWN 10 percent compared to the fourth quarter.

The bulls will claim that all these (endless) restructuring charges will mean big earnings gains once demand picks up.

Here's the problem: the Street already believes this story. Strength in airlines and automotives are already priced in.

Don't believe me? Look at consensus earnings for the rest of the year. After a $0.10 gain in the first quarter, we are now expecting gains of $0.23, $0.75, and $1.08 in the second, third, and fourth quarters respectively.

That's why we had two earnings downgrades of Alcoa in the last week.

_____________________________
CNBC Data Pages:

_____________________________

Questions? Comments? tradertalk@cnbc.com