The Zacks Analyst Blog Highlights: Alcoa, Aluminum Corporation Of China Limited, Rio Tinto, BHP Billiton and Nordstrom

Mon Jul 11, 2011 9:30am EDT

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The Zacks Analyst Blog Highlights: Alcoa, Aluminum Corporation Of China Limited, Rio Tinto, BHP Billiton and Nordstrom

PR Newswire

CHICAGO, July 11, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Alcoa Inc. (NYSE: AA), Aluminum Corporation Of China Limited (NYSE: ACH), Rio Tinto Plc. (NYSE: RIO), BHP Billiton Ltd. (NYSE: BHP) and Nordstrom Inc. (NYSE: JWN).

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Here are highlights from Friday's Analyst Blog:

Earnings Preview: Alcoa

The largest U.S. aluminum producer, Alcoa Inc. (NYSE: AA) announced that it would release its results for the second quarter of 2011 after the market opens on July 11, 2011.

Alcoa kicked off the earnings season with its first quarter posting an EPS of $0.28 and exceeding the Zacks Consensus Estimate by a penny. This excludes the negative impact of special items or $0.01 cent per share, including EPS of $0.27.

With respect to earnings surprises, the company outdid the Zacks Consensus Estimate in the trailing four quarters. This is reflected in the average earnings surprise of 18.14%, with positive surprises in each of the quarters involved.

First Quarter Review

Revenues for the quarter were $5.96 billion and missed the Zacks Consensus Estimate of $6.112 billion. Revenues, however, increased 22% year over year, helped by rising prices for aluminum and alumina.

The company's adjusted EBITDA of $955 million was the best the company has seen since its third quarter of 2008, leaping remarkably by 60% over the year-ago quarter.

The company posted improved profits across all its segments. This was followed by revenue growth in the end-markets led by double-digit increases in packaging, automotive, commercial transportation and industrial products.

Alumina - The shipments in the reported quarter increased 3.7% year over year to 2.2 million metric tons on the production of 4.0 million metric tons.

Primary Metals - Shipments in the first quarter of 2011 amounted to 0.7 million metric tons, almost flat with the previous-year quarter. Production increased by 1.6% year over year to 0.9 million metric tons.

Flat-Rolled Products - Shipments in the quarter jumped 17.7% year over year to 0.4 million metric tons.

Engineered Products and Solutions - Shipments in the quarter jumped 16.4% year over year to 0.6 million metric tons. The segment's strong results were marked by new product developments and productivity improvements.

Agreement of Estimate Revisions

Four out of the 12 analysts covering the stock for the second quarter of fiscal 2011 have made a downward revision in the last 30 days. None of the analysts have made an upward revision in the last 30 days.

Magnitude of Estimate Revisions

The second quarter 2011 estimate was 35 cents per share in the last 60 days and increased by a penny to 35 cents per share in the last 30 days. It was flat at 35 cents in the last 7 days, however dropping again by a penny to 34 cents per share currently. The Zacks Consensus Estimate for the second quarter is 160.9% higher than the year-ago quarter.

Our Take

Alcoa Inc., a Pennsylvania-based corporation, is among the world's leading producers of primary and fabricated aluminum and alumina. It involves the technology of mining, refining, smelting, fabricating and recycling of aluminum. We believe that Alcoa's cost reduction efforts are to some extent, offsetting the negative impact of higher energy and raw material costs on profitability.

The company is divesting underperforming assets through its restructuring program. The annual global consumption of aluminum products, both upstream and downstream, is expected to double over the next 15 years. This consumption boom will be driven primarily by growth in China, India, Russia and Brazil, whose demographics are accelerating development.

Alcoa is on track to meet its 2011 financial targets, with debt-to-capital ratio improving to 33.6%, 130 basis points better than fourth quarter 2010. The company remains optimistic about the remainder of 2011 and is confident of generating positive results. Alcoa reaffirmed that global aluminum demand would grow 12% in 2011.

Currently, Alcoa has a short-term (1 to 3 months) Zacks #4 Sell rating and a long-term (6 months) Neutral recommendation.

Alcoa faces stiff competition from Aluminum Corporation Of China Limited (NYSE: ACH), Rio Tinto Plc. (NYSE: RIO) and BHP Billiton Ltd. (NYSE: BHP).

Nordstrom Comps Up 7.9%

Same-store sales at Nordstrom Inc. (NYSE: JWN) grew by 7.9% for the five-week period ended July 2, 2011. Total retail sales in June 2011 climbed 12.8% to $927 million from $822 million for the five-week period ended July 2, 2011.

Moreover, Nordstrom's year-to-date same store sales increased 7.0%. During the said period, the company's total retail sales surged 12.4% to $3.95 billion from $3.52 billion in the prior-year period.

As of July 2, 2011, Nordstrom had 116 Nordstrom full-line stores, 95 Nordstrom Racks, 2 Jeffrey boutiques and 1 clearance store. Same-store sales at Nordstrom stores (includes Nordstrom full-line stores and Direct) increased 9.0% in June, while Nordstrom Rack reported a rise of 4.6% for the five-week period ended July 2, 2011. However, same store sales at Nordstrom stores climbed 8.1% year-to-date coupled with a 2.8% increase in Nordstrom Rack.

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