Alcoa inc NYSE:AA

ALCOA

AA : NYSE

Date: 07.03.11

Symbol: AA

Exchange: NYSE

Industry: Aluminum

Sector: Basic materials

Recommendation:

Target Price: 23.00USD

Current Price: 16.575 USD

Summary

• Aluminum demand is rising

• China Sales may double over next 5 years

• Company has a long history of beating

estimates

• Full Year 2010 most likely will beat estimates

• Alcoa is the world’s leading producer of primary

aluminum, fabricated aluminum and alumina.

Fundamental Data

Market Cap ($M): 17.61B

Avg.Vol (10Day): 26,935,700

52 Week High/Low: 17.68-9.81

P/E ratio (TTM): 68.49

P/B ratio: 1.25

Dividend yield (%): 0.70

ROA (%): 2.05

ROE (%): 2.45

Profit Margin (%): 1.21

Operating Margin (%): 6.06

SUMMARY

INTRA-DAY INTERACTIVE CHART

Change -0.055 (-0.331%)

Bid N.A.

Ask N.A.

Open 16.770

High 16.800

Low 16.370

Volume N.A.

52-Week Range 17.68 - 9.81

1-Yr Return 20.848%

Earnings

EARNINGS

FUNDAMENTALS

Earnings Past 12 Months 0.530 Shares (Millions) 1,062.689

Quarter Est. EPS (03/11) 0.26 Market Cap (Millions) 17,614.080

Quarter Est. EPS (06/11) 0.31 Float (Millions) 1,058.481

Year Est. EPS (12/11) 1.32 Return on Equity 1.944

Price/Earnings (Trailing) 31.274 Short Interest 55,616,109.000

Relative P/E 2.018 Last Dividend Reported 0.030 Regular Cash

Earnings Growth Rate 139.600 Dividend Yield (ttm) 0.724

Estimated P/E 12.600 Relative Dividend Yield 0.397

Alcoa Corporate Overview

• Alcoa is the world’s leading producer of primary aluminum, fabricated aluminum and

alumina.

• In addition to inventing the modern-day aluminum industry, Alcoa innovation has been

behind major milestones in the aerospace, automotive, packaging, building and

construction, commercial transportation, consumer electronics and industrial markets

over the past 120 years.

• Among the solutions Alcoa markets are flat-rolled products, hard alloy extrusions, and

forgings, as well as Alcoa® wheels, fastening systems, precision and investment castings,

and building systems in addition to its expertise in other light metals such as titanium

and nickel-based super alloys.

• Sustainability is an integral part of Alcoa’s operating practices and the product design and

engineering it provides to customers.

• Alcoa has been a member of the Dow Jones Sustainability Index for nine consecutive

years and approximately 75 percent of all of the aluminum ever produced since 1888 is

still in active use today.

• Alcoa employs approximately 59,000 people in 31 countries across the world.

Recent news

Alcoa Acquires Full Ownership of Carbothermic Smelting Technology

NEW YORK--(BUSINESS WIRE)--Alcoa (NYSE:AA) today announced that it has finalized a deal with

ORKLA ASA to acquire full ownership of the technology associated with the carbothermic aluminum

production process, previously jointly owned by the companies.

Now in the research and development phase, the carbothermic aluminum production process is a

new technology that holds the potential to produce aluminum at a lower cost, driven by reduced

conversion costs, lower energy requirements, and lower emissions at a lower capital cost than

traditional smelting. The technology also holds potential for significant cost improvements in the

production of other metals.

“Alcoa will continue research on the carbothermic production process that we pioneered and have

advanced with Orkla’s support over the past few years,” said John Thuestad, group president of

Alcoa’s Global Primary Products. “If successful, the carbothermic process would allow for economical

operation of smaller facilities with flexible power supplies that the current generation of smelters

cannot meet. This would improve the ability to site new facilities.”

The research facility will be relocated to Alcoa’s facility in Lista, Norway, and several key research

employees will transfer to Alcoa.

“Alcoa chose the Lista site to continue research on this potentially breakthrough technology because

of the skills of the Alcoa Norway team and the supportive environment Norway provides for

innovation,” said Thuestad. “We believe this is the right place to continue developing Carbothermic

technology.”

Details of the transaction were not disclosed.

Alcoa Wheels Recognized with “Top 20” New Product by Heavy Duty Trucking

Wheel Torque Solutions Selected For Revolutionizing the Wheel Changing Process

CLEVELAND--(BUSINESS WIRE)--Heavy Duty Trucking recognized Alcoa Wheels, a key supplier to

Wheel Torque Solutions, as a “Top 20” new product recently at the TMC Annual Convention in

Tampa, Florida. Heavy Duty Trucking editors, in combination with members of the American Trucking

Associations’ Technology and Maintenance Council (TMC), evaluated hundreds of new products for

those that are innovative and likely to contribute to the bottom line by improving safety, fuel

economy or efficiency.

As a critical component of Wheel Torque Solutions, Alcoa aluminum wheels help to improve the

wheel changing process by providing a more robust mounting surface. In addition, Alcoa aluminum

wheels are not susceptible to paint build-up or corrosion resulting in a more dependable fastening

interface.

“Our engineering, field service and commercial teams worked with a leading fleet company for nearly

two years to develop Wheel Torque Solutions,” stated Mike Parnell, Vice President and General

Manager - Alcoa Commercial Vehicle Wheels. “We’re honored that this system has been recognized

for improving maintenance procedures and reducing wheel-offs in the commercial transportation

market.”

Wheel Torque Solutions, comprised of four leading fleet truck product suppliers, Alcoa Wheels, B&D

Cold Heading, Chicago Pneumatic, and ITW CIP, has revolutionized the wheel changing process.

Wheel Torque Solutions brings together the optimum nut, bolt, wheels and procedures easing the

installation process, increasing torque retention and reducing the potential for costly and dangerous

wheel-off incidents.

For more information on Alcoa wheels, visit www.alcoawheels.com. For details on Wheel Torque

Solutions, seewww.wheeltorquesolutions.com.

About Alcoa Wheel and Transportation Products

Alcoa Wheel and Transportation Products, headquartered in Cleveland, Ohio, serves the

commercial vehicle, automotive, and defense markets with products used in a range of

applications including forged aluminum wheels, aluminum space frames, specialized vacuum

die cast products, niche products such as Dura-Bright® and Dura-Flange® wheels and M-

Series™ medium truck wheels, as well as a variety of other aluminum components for these

markets. AWTP is composed of three divisions: Transportation Products, Commercial Vehicle

Wheels, and Automotive Wheels. It employs 2,800 people at 30 locations worldwide.

REVENUE

Periods 2009 2010

March 4147.0 4887.0

June 4244.0 5187.0

September 4615.0 5287.0

December 5433.0 5652.0

Note: Units in Millions of U.S. Dollars

EARNINGS PER SHARE

Periods 2009 2010

March -0.5877 -0.1936

June -0.32024 0.12177

September 0.07362 0.05844

December -0.27402 0.2305

Note: Units in U.S. Dollars

CONSENSUS ESTIMATES ANALYSIS

# of Estimates Mean High Low 1 Year Ago

SALES (in millions)

Quarter Ending มี.ค.-54 7 6,229.49 7,840.00 5,424.00 5,048.00

Quarter Ending มิ.ย.-54 6 6,170.57 6,671.09 5,610.00 5,476.00

Year Ending ธ.ค.-54 11 23,830.80 26,742.00 21,013.00 23,247.20

Year Ending ธ.ค.-55 9 25,422.80 31,089.00 23,039.00 24,239.10

EARNINGS (per share)

Quarter Ending มี.ค.-54 14 0.27 0.34 0.19 0.22

Quarter Ending มิ.ย.-54 12 0.32 0.49 0.19 0.26

Year Ending ธ.ค.-54 17 1.31 2.20 0.75 1.23

Year Ending ธ.ค.-55 14 1.60 2.81 1.17 1.37

Sales and Earnings Figures in U.S. Dollars (USD)

VALUATION RATIOS

Company Industry Sector S&P 500

P/E Ratio (TTM) 76.60 23.28 19.26 17.76

P/E High - Last 5 Yrs. 60.19 41.08 128.20 89.76

P/E Low - Last 5 Yrs. 11.30 5.96 14.90 12.28

Beta 2.09 1.39 1.35 1.32

Price to Sales (TTM) 0.84 11.05 2.16 2.21

Price to Book (MRQ) 1.25 0.13 1.79 2.99

Price to Tangible Book (MRQ) 2.08 0.15 1.92 5.39

Price to Cash Flow (TTM) 9.56 21.39 19.64 68.54

Price to Free Cash Flow (TTM) 15.76 1.37 5.43 20.80

% Owned Institutions -- -- -- --

DIVIDENDS


Dividend Yield 0.72 0.71 1.16 1.59

Dividend Yield - 5 Year Avg. 2.14 1.43 1.70 2.48

Dividend 5 Year Growth Rate -27.52 -7.00 11.53 -5.22

Payout Ratio(TTM) 47.32 13.48 5.14 42.56

GROWTH RATES


Sales (MRQ) vs Qtr. 1 Yr. Ago 4.03 24.74 435.27 10.18

Sales (TTM) vs TTM 1 Yr. Ago 13.96 28.37 13.90 10.28

Sales - 5 Yr. Growth Rate -3.85 25.27 13.53 7.34

EPS (MRQ) vs Qtr. 1 Yr. Ago 184.12 121.43 63.69 77.87

EPS (TTM) vs TTM 1 Yr. Ago 119.57 -- -- --

EPS - 5 Yr. Growth Rate -29.14 3.64 13.10 4.53

Capital Spending - 5 Yr. Growth Rate -13.66 22.27 19.53 3.43

FINANCIAL STRENGTH


Quick Ratio (MRQ) 0.82 0.11 0.77 0.67

Current Ratio (MRQ) 1.31 0.16 1.51 0.98

LT Debt to Equity (MRQ) 64.96 9.58 16.34 115.27

Total Debt to Equity (MRQ) 67.34 16.36 31.16 164.60

Interest Coverage (TTM) -2.91 0.02 0.16 16.74

PROFITABILITY RATIOS


Gross Margin (TTM) 18.27 37.14 16.85 31.63

Gross Margin - 5 Yr. Avg. 18.92 39.62 26.27 29.26

EBITD Margin (TTM) 11.77 -- -- --

EBITD - 5 Yr. Avg 13.40 22.68 19.55 18.68

Operating Margin (TTM) 2.61 21.69 6.73 --

Operating Margin - 5 Yr. Avg. 6.55 15.13 13.85 14.57

Pre-Tax Margin (TTM) 2.61 21.75 6.76 15.36

Pre-Tax Margin - 5 Yr. Avg. 6.55 15.03 13.67 14.18

Net Profit Margin (TTM) 1.90 16.33 4.16 11.29

Net Profit Margin - 5 Yr. Avg. 4.63 9.76 9.53 10.44

Effective Tax Rate (TTM) 27.01 29.23 10.10 19.88

Effecitve Tax Rate - 5 Yr. Avg. 29.32 42.74 28.38 24.49

EFFICIENCY


Revenue/Employee (TTM) 356,152 5,193,070 49,080,426 682,649

Net Income/Employee (TTM) 6,780 761,346 -69,450,927 84,653

Receivable Turnover (TTM) 13.58 0.62 0.66 8.52

Inventory Turnover (TTM) 7.02 0.11 0.34 7.15

Asset Turnover (TTM) 0.54 0.04 0.05 0.55

MANAGEMENT EFFECTIVENESS


Return on Assets (TTM) 1.03 0.10 0.51 6.01

Return on Assets - 5 Yr. Avg. 3.05 7.65 9.91 5.60

Return on Investment (TTM) 1.32 0.13 0.63 7.67

Return on Investment - 5 Yr. Avg. 4.01 9.39 14.25 7.29

Return on Equity (TTM) 2.00 0.19 0.98 17.77

Return on Equity - 5 Yr. Avg. 6.68 15.27 18.91 14.52

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Contact Detail:

Chutinush Taksinapinunt

Business Development Director

Heffernan Capital Management

Email: [email protected]

Chutinush Taksinapinunt holds a Bachelor of Business Administrators degree Majoring in

Finance and Banking. Chutinush Taksinapinunt is an experienced market maker and Portfolio

Manager, having worked with some of Thailand’s largest Securities Company and Financial

Institutions.

Price Estimate by Shayne Heffernan PhD

Shayne Heffernan of Ebeling Heffernan holds a PhD in Economics serves as CEO of Heffernan

Holdings Inc and Co Founder of Ebeling Heffernan www.ebeling-heffernan.com

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Tel: +65 6329 6408Fax: +65 6329 9699

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Alcoa inc NYSE:AA