Flashback – Earnings Season Starts

Alcoa reported its set of figures for the quarter ending on September 30. Press release: Alcoa Strengthens Cash Position and Returns to Profitability in Third Quarter.

On first sight it looks surprisingly good. The cost cutting program was executed well and that is the main reason for returning to profit. EPS ex. extraordinary items came at 0.04$ vs. consensus EPS of -0.09$. Revenue up 9.5% in comparison to Q2. I see no large creative accounting items for the moment. Will look in detail. The company will still end the year with a loss and if we use Q2 0.04$ EPS to estimate forward P/E ratio, we end up at 85+. To sum up, better than expected but far, far away from fundamentally sound valuation. Shares are up 7.8% in after hours.

If we judge by Alcoa earnings, cost cutting will be the theme for following season and market shooting further up is not excluded.

I will not re initiate my SPY put options position for the time being, will wait to see what will other companies report. Flashbacks to the Q2 earnings and market action.

This entry was posted on Wednesday, October 7th, 2009 at 3:52 pm and is filed under Markets. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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