Last night Alcoa (AA) reported 1Q earnings, here are the macro take-aways investors should know:
1) They made money on a recurring basis but missed expectations by a penny. They lost 20 cents per share, but this was better than 61 cents per share in Q1 of 2009. Moreover, the 20 cents of losses had 29 cents of special charges partly related to health care reform laws and the permanent shut-down of two smelters. Thus on an operating basis, Alcoa appears to have been profitable. If we assume 9 cents of recurring 'adjusted' earnings per share for Q1 2010, then Alcoa slightly misses consensus expectations for 10 cents, according to consensus data from Thomson Reuters.
2a) They expect 2010 strength in North American auto & trucking industries, but substantial weakness in commercial construction. So watch out today for stocks in these industries.
2b) First quarter revenue growth was particularly strong for transport and industrial products industries. Good news for these industries' related stocks.
3) Finally, global demand for aluminum will be pretty robust in 2010 (+10%). This is a decent indicator of economic activity given that it is used in transportation, packaging, construction, household appliances, and power transmission. So maybe AA investors won't like the earnings relative to AA the stock, but the company's data shows some patches of expected economic strength, particularly in transportation.
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