Alcoa Inc. (AA) announced that it has reached a deal with Embraer S.A. (ERJ) to supply its products for the latter's next-generation airliners.
As per the agreement Embraer S.A. will utilize Alcoa's proprietary aluminum alloys, advanced design and manufacturing techniques, and its fastener technologies to support Embraer's development of new high-performance metallic fuselage and wing solutions for its family of aircraft.
The new agreement will leverage Alcoa's 100 years of aerospace technology experience and latest technology innovations to help Embraer develop high-performance aluminum aircraft using the newest aluminum products including aluminum and aluminum lithium alloys; advanced design approaches and structural technologies; and the latest fastener and joining technologies.
Embraer S.A. is the world’s largest manufacturer of commercial jets up to 120 seats, and one of Brazil’s leading exporters.
Alcoa Inc., a Pennsylvania-based corporation, is among the world’s leading producers of primary and fabricated aluminum and alumina. It mines, refines, smelts, fabricates and recycles aluminum. We believe that Alcoa’s cost reduction efforts are, to some extent, offsetting the negative impact of higher energy and raw material costs.
Recently, Alcoa released its third quarter 2011 results. The company reported adjusted earnings per share of 15 cents, missing the Zacks Consensus Estimate of 22 cents. Adjusted earnings more than doubled from 6 cents reported in the year-ago quarter, but were 46.4% lower than the sequential quarter earnings of 28 cents due to lower metal prices, seasonal factors and weakness in Europe.
Revenues for the quarter were up 21% year over year to $6.419 billion, and were down from $6.585 billion in the sequential quarter. Alcoa’s end-markets demonstrated strong revenue growth, on a year-over-year basis whereas, sequentially the company experienced mixed market conditions.
Revenue was lower for both alumina and aluminum, down 5% and 1%, respectively, driven by lower alumina shipments and lower realized pricing in both businesses. In the end-markets, revenue increased in commercial transportation (6%) and aerospace (2%), while declines were seen in automotive (7%), industrial products (6%), building and construction (5%), and packaging (4%).
The company’s adjusted EBITDA was $821 million, up 36% from third quarter 2010, but down 21% from second quarter 2011.
Management remained cautious regarding the global economy (and Europe), but it reiterated its 12% growth estimate for aluminum demand in 2011, as well as its belief that global consumption of aluminum will double by 2020.
Alcoa expects aerospace and automotive demand to remain strong. Alcoa forecasts aerospace demand will continue to grow in the second half of 2011 and the year-end growth rate will be between 6% and 7%. In the automotive market, Alcoa projects continued growth in the second half of 2011 and a year-over-year improvement of 3% to 5%.
Growing demand for aluminum beverage cans in China, Europe and the Middle East will offset flat-to-declining markets in the United States and drive overall packaging market growth of 2% to 3% in 2011 compared to 2010. The recovery in the industrial gas turbine market continues to support a brighter long-term outlook and a 2011 growth projection of 5% to 10%.
The building and construction market continues to struggle in North America and Europe, leading to a growth projection of 1% to 3%, primarily due to continued strength in non-residential construction in China.
The outlook for commercial transportation is mixed, with a weaker second half of 2011, driven primarily by lower sales in Europe and China , offsetting strong first-half results and continued gains in the North American market. Alcoa projects heavy truck and trailer sales to range from flat to 2% growth over 2010.
Currently, Alcoa has a short-term (1 to 3 months) Zacks #3 Hold rating and a long-term (6 months) Neutral recommendation.
Besides Alcoa, Aluminum Corporation Of China Limited (ACH) or Chalco is also a major player in the industry.
ALCOA INC (AA): Free Stock Analysis Report
ALUMINUM CP-ADR (ACH): Free Stock Analysis Report
EMBRAER AIR-ADR (ERJ): Free Stock Analysis Report
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