NEW YORK ( Trefis ) -- Alcoa ( AA) will kick off first-quarter earnings season when it reports results after the market closes Tuesday. We expect the company to record its second consecutive quarterly loss as it continues to battle with a decline in aluminum demand and the subsequent decline in prices due to global economic conditions. Although aluminum prices have recovered a bit in 2012, they are still significantly down from a year ago. Alcoa has realigned its strategy and is closing down some of its smelters in an attempt to remain profitable and to strengthen its product portfolio going forward. Alcoa competes with companies such as ArcelorMittal ( MT) and US Steel ( X). Our price estimate for Alcoa stands at $12, implying a premium of close to 20% to the current market price. See Full Analysis for Alcoa.
Vertical integration should also help the company stay healthy even with depressed prices. Alcoa is a fully integrated producer of aluminum; it mines bauxite, refines it into alumina, makes primary aluminum and also produces midstream products like flat rolled sheets and downstream engineered products. Further, Alcoa is pushing to ramp up its midstream and engineered products business, which offers higher margins than primary metals. However rising input costs will remain a concern for the foreseeable future and could effectively outpace and spoil the company's cost cutting efforts. Click here to find out how a company's products impact its stock price. Like our charts? Embed them in your own posts using the Trefis Wordpress Plugin.