Analysts Expect Soft 4Q for Alcoa

Aluminum giant Alcoa Inc. (AA) will report its fourth quarter earnings after the bell today, and analysts are expecting relatively soft results due to sinking aluminum prices. Aluminum dropped about 12% in the second half of 2007 amid troubles in the housing and manufacturing sectors.

RBC Capital Markets analyst Fraser Phillips is forecasting earnings per share of $0.36, compared to $0.59 in the third quarter. Besides the lower prices and de-stocking in the aerospace industry, he also suggests negative currency movements and rising energy costs could affect results.

Mr. Phillips has a "sector perform" rating on the stock, and a price target of $40 a share. He notes Alcoa could be worth $51.00 in the event of a takeover, but he considers that unlikely.

At Citigroup Global Markets, analyst John Hill is looking for earnings of C$0.34 a share. He still likes the stock long-term, and thinks aluminum prices could start to run in the second half of 2008 due to structural changes in the sector.

Mr. Hill points to a number of themes that should come up on Alcoa's earnings conference call: softness in housing and auto markets, details on the packaging sale, plans for further downstream restructuring, cash deployment and share buybacks, and analysis of commodity markets.