Alcoa (AA) reported Q3 results and beat expectations both on the top and bottom-line. Revenues of $5.83bil were much higher than the Street's $5.57bil estimate. Better revenues from AA also positively impacted our Q3 GDP estimate. We now expect real GDP annualized growth rate of 1.5% for Q3, up slightly from our initial estimate of 1.4%. We note that this number remains below the 1.6% consensus but is slightly higher than Q2's 1.3%.
Below is an update on what AA expects from its end markets in 2012.
- Slightly upped growth estimate in the automotive space in North America to 11% - 15%, from 10% - 14%.
- North American heavy trucks & trailers lowered significantly to 2% - 4%, from 4% - 8%. We note the Company lowered its assessment on this market in Q2 also.
- Beverage can packaging market in North America was unchanged. Sales growth projection remained between -1% and 0%.
- 5% sales decline projection for the commercial building and construction market in North America was maintained.
- For Europe, heavy trucks & trailers were lowered to decline of 8% - 11%, from decline of 3% - 8%. In addition, beverage can packaging sales growth was lowered to 4% - 5%, from 5% - 7%.
- AA's assessments certainly provided more evidence of the continuing slowdown of China's economy. While there was a bright spot in China's automotive market, as AA increased it projection to 4% - 7% growth, from its previous wider range of 2% - 7%, the Company slashed its outlook on heavy trucks & trailers in China. It now expects a decline between 18% and 21% in 2012, compared with its previous assessment of a 3% - 8% decline. AA also lowered its outlook on beverage can packaging sales growth in China to 5% - 8%, from 15% - 20%.
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