This Analyst Expects Alcoa's Earnings To Fall, But 'Only Slightly'

In a report published last week, RBC Capital Markets analyst Fraser Phillips previewed

's first quarter results, which are scheduled to be released on Wednesday after market close. Phillips is expecting Alcoa to earn $0.31 per share, marking a slight decrease from the fourth quarter's $0.33 earnings per share as lower prices and premiums will only be partially offset by strong currencies. On a 15-day lag basis, LME aluminium prices were lower by 8 percent to $0.82 per pound while API prices on a 30-day prices were down 1 percent to $347 per ton. At the same time, currencies had a "strong" and favorable impact with the U.S. dollar rising "strongly" versus the Australian dollar, euro, Canadian dollar, Brazilian real and Norwegian krone. Alcoa has already noted that it expects Alumina productivity gains to offset 200 kmt lower production, increases in energy and other costs, and a $5 million increase in refinery start-up costs in Saudi Arabia. In Primary Metals, productive is expected to offset 35 kmt lower production, cost increases, and a $45 million decrease in energy sales due to lower power prices in Brazil. At the same time, Engineered Productions and Solutions ATOI is expected to be up 15 percent to 20 percent sequentially due to healthy market conditions. Bottom line, a decline in LME and API prices, weaker results in Global Rolled Products will be "mostly" offset by positive currency impacts and strength in Engineered Products and Solutions. Shares remain Sector Perform rated with an unchanged $18 price target.