NEW YORK ( TheStreet)- Alcoa's ( AA) earnings for the second quarter could miss estimates on higher production costs and lower realized aluminum prices. However, management guidance for 2010 will define the stock price movement.

Alcoa, the largest U.S. aluminum producer, is scheduled to financial results after markets close on Monday. The company is expected to report earnings of 12 cents share, according to analysts polled by Bloomberg, compared with a loss of 19 cents for the first quarter of 2010, and a loss of 32 cents in the year-earlier second quarter.

Last week, JPMorgan analyst Michael Gambardella lowered Alcoa's earnings per share to 10 cents from an earlier forecast of 15 cents, citing lower-than-expected aluminum prices. Gambardella maintained a December price target of $15.50 since the middle of May.

During the second quarter, sales are estimated to zoom 26% to $5.02 billion from a year earlier and decline 4% from $5.23 billion for the first quarter of 2010. Meanwhile, earnings before interest, taxes, depreciation and amortization is expected to zoom 40 times to $706.3 billion from $17.3 billion for the second quarter of 2009. However, Ebitda is expected to increase marginally from $705.8 million for the first quarter of 2010.
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Sales declines can be attributed to the drop in aluminum prices during the second quarter. On the London Metal Exchange, aluminum for spot delivery dipped 7.5% on inventory buildup in China, the world's dominant producer and consumer. Aluminum inventory levels at the Shanghai Futures Exchange have zoomed 22.2% to 496,853 tons, as reported on June 25, from 406,693 tons reported on March 25.

In addition, caustic soda prices, which account for around 11% of alumina refining costs, have increased to $350 a ton early second quarter from $245 per ton early this year.

Alcoa's stock has declined 34.5% year to date, while Kaiser Aluminum ( KALU), Alumina ( AWC), and Aluminum Corp ( ACH) have shed 12.4%, 18.9%, and 28.7% of their respective market values so far this year.

On a risk-adjusted basis, Alcoa underperformed the S&P 500 by 26.7%, whereas Kaiser outperformed the index by 2.4% in the past six months. During the past year, Alcoa's return on equity was a negative 9.6% in comparison to 8.4% for Kaiser.

Alcoa has eight buy, eight hold, and two sell ratings, as per TheStreet's Analyst ratings guide. Analyst recommendations for the stock remained unchanged during the second quarter after stock upgrades during the first quarter.
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