Alcoa investors bracing for earnings hit

NEW YORK: Investors in Alcoa Inc areexpecting a rough quarterly earnings report on Tuesday from the aluminum maker,whose profits are expected to sink nearly 20 percent as escalating energy andother costs take their toll.

Aluminum prices should prove to be abright spot, although the market will be closely eyeing Alcoa's margins to seehow much of the increased costs for energy and materials, such as caustic soda,the company has managed to pass along to its customers.

"I thinkthat this quarter's going to be pretty mundane. The trends that were in place inthe first quarter are going to still be there," said Charlie Smith, chiefinvestment officer at Fort Pitt Capital Group, which owns about $10 million ofAlcoa shares.

Analysts are expecting Alcoa's income from continuingoperations to slide to 66 cents per share from 81 cents a year earlier,according to Reuters Estimates.

That forecast is also about 8percent lower than the 72 cents per share analysts had predicted in mid-June.

Alcoa had said on June 10 that an explosion at a gas supply plant inAustralia would trim its second-quarter earnings by 2 to 3 cents per share.

Surging energy costs, a weak U.S. dollar and worries about thehealth of Alcoa's major customers will be in focus as the market digests thefirst earnings report of the quarter from a component of the Dow Jonesindustrial average.

"The bigger worry for me is really the trends inthe auto industry and the aerospace industry given that two major end-marketsfor aluminum are really under assault right now," said Scott Burns, analyst atMorningstar.

"Even though airlines need to switch to more fuelefficient airplanes, they simply won't be able to if they don't have any money.The woes in the automotive sector are pretty clear .... So I do think in theshort-term for Alcoa it's going to be tough," he added.

Alcoa shareshave slumped 26 percent from their recent high in mid-May to around $33 onMonday, bringing their year-to-date decline to nearly 10 percent. Still, thatdrop is not as severe as the nearly 16-percent drop in the Dow Jones industrialaverage <.DJI> over the same period.

Alcoa rose 5 cents, or0.15 percent, to $32.83 on the New York Stock Exchange late Monday afternoon.