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Alcoa kicked off the fourth quarter 2012 earnings season with an on-target earnings estimate of $0.06 per share, matching Bloomberg analysts' fourth quarter estimate for the company.

The company reported fourth quarter revenue of $5.9 billion, achieving earnings of $597 million and resulting in earnings per share of $0.21 before adjusting for special items.

Superior price achievement for the quarter helped profitability for the metals manufacturer. Alcoa's average selling price for aluminum was $2,325 a ton for the quarter, while the immediate delivery aluminum price on the London Metal Exchange averaged $1,999 for the quarter, according to data from Bloomberg.

Cost cutting also greatly contributed to the company's success. Specifically, the sale of its Tapoco Hydroelectric Project helped improve primary metals income by $245 million.

While pricing pressure and global economic instability continue to remain risks for the aluminum market, global aluminum demand, specifically in China, should help Alcoa in 2013.

As outlined by Klaus Kleinfeld, Alcoa Chairman and CEO, average global demand for aluminum is expected to increase by 7 percent in 2013, following a 6 percent growth rate in 2012. GDP expansion in China accounts for 11 percent of global aluminum demand. Alcoa's supply relationships, given its ranking as the world's largest aluminum seller, should allow the company to capitalize on China's market growth, helping improve profitability in 2013.

The potential for aluminum demand in China, combined with the company's operational capabilities, make the $9 stock appealing. With continued U.S. equity market improvements and an expected dividend of $0.12, Bodie, Kane and Marcus' intrinsic value model[1] estimates the stock price to reach $11.00 in 2013, making its current price a buying opportunity.

1The intrinsic value formula discounts the projected one year value by the risk free rate on the one-year Treasury note plus a beta of 1.98 times the market's risk premium. The market risk premium assumes stock market appreciation in 2013 to be similar to 2012 and is based on Dow Jones Industrial Average index return.

Source: China's Growth Should Help Alcoa Remain Profitable In 2013