Alcoa's 4Q07 Came In Pretty Much as Expected

Alcoa Inc. (AA) surprised very few when they released weak fourth quarter results on Wednesday, highlighted by a 45% year-over-year drop in earnings from US66¢ per share to US36¢ per share.

RBC Capital analyst H. Fraser Philips said the earnings decline was expected telling clients in a note that Alcoa has been plagued by "lower aluminum prices, a weakening US$, higher petroleum and energy costs, and de-stocking in the aerospace industry."

Looking forward, Mr. Philips said Alcoa expects global aluminum consumption to remain healthy and growth in its end use markets is expected.

On the flip side, the analyst added, Alcoa's operating costs will remain under pressure and first quarter results in 2008 will at best be in line with the quarter just passed.

Mr. Philips also noted that Alcoa's share repurchase program continues this year and allows for a further 25% of the company's outstanding shares.

He revised downward his price target on Alcoa shares from US$40 to US$38 but noted in the unlikely event of Alcoa being acquire, shares could be worth as much as US$51and maintained his "sector perform" rating.

If there was anyone surprised by Alcoa's results, it may have been Desjardins analyst John Redstone who predicted earnings per share of US45¢.

He said the variance from his estimate was due Alcoa's lower after-tax operating income from the company's flat-rolled products and primary divisions,"

Mr. Redstone left his 2008 earnings estimate in tact at US$4.45 per share and reiterated his "buy" rating and US$53.40 price target for the stock.