Alcoa To Benefit From Higher Aluminum Prices

A 5 percent increase in prices may boost profits, but analysts aren't sure if it will help the company climb out of its recent second-quarter loss.

NEW YORK (AP) — Alcoa Inc. should benefit from slightly higher aluminum prices this year and next year, but analysts disagree how much that will affect profits.

After the markets closed Monday, Alcoa reported it slid to a second-quarter loss from a year-ago profit due to weak aluminum prices and hefty quarterly charges. Excluding special charges and other items, however, Alcoa earned an adjusted $61 million, or 6 cents a share.

That's better than the 5 cents per share that analysts had expected.

On Tuesday, Jefferies analyst Peter Ward cut profit estimates for the New York aluminum maker to 40 from 70 cents per share for 2012 and to 80 from 90 cents per share in 2013. Persistently high aluminum inventories should keep a lid on price increases this year, Ward said.

Ward expects aluminum prices to increase from a current price of 85 cents per pound to an average of 90 cents per pound in the second half of the year and $1 per pound in 2013.

Citi analyst Brian Yu, however, raised his profit expectations for Alcoa to 32 cents from 27 cents per share for 2012. Yu said that the higher prices and better production helped the company beat Wall Street profit expectations for the second quarter. Its surprisingly strong results should lift its overall profit in 2012, Yu said.

Shares added 3 cents, or less than 1 percent, to $8.79 in premarket trading.

More in Supply Chain