Alcoa Beats on EPS but That May Not Be Enough

NEW YORK ( TheStreet) -- The starting gun of the first earnings season of 2013 has been fired, and as usual Alcoa ( AA) leads the way.

Alcoa reported earnings of 11 cents per share, beating not only analysts' consensus amount of eight cents, but also beating the whisper number of 10 cents. Investors were still not impressed based on the shares falling below the closing price in after-hours trading. Unfortunately, without an improving economy, the shares may have more to fall.

Investors instead focused on shrinking revenue and expected lower aluminum prices. Net income was $149 million, a marked improvement from the loss produced in the same quarter last year. Still, not overly impressive for a company with a market cap of nearly $9 billion.

Based on current earnings with Monday's closing price, Alcoa is continues to trade at a relatively high price to earnings multiple above 20. For comparison, the S&P 500 ETF ( SPY) trades at an average multiple of 18, and bellwether General Electric's ( GE) P/E is 17.9, but pays a 3.3% dividend, more than double that of Alcoa.

The Street's Richard Saintvilus thoroughly spelled it out in his earnings preview article Will Alcoa's Aluminum Shine for Investors? . Saintvilus is correct about Alcoa testing investor patience and fortitude.

There is only so much a large industrial can do during economic downturns. The recent jobs report, too many to ignore anecdotal reports of businesses adjusting in front of the Affordable Care Act implementation, and entitlement reform, leave little doubt that hopes of a rapidly improving U.S. economy will be difficult to fulfill.

Asia is a net positive for Alcoa and the world economy, but as long as China remains the "factory to the world" more than a consumer nation, there is only so much China can add. Alcoa doesn't appear to be sitting around waiting for the world economy to fix its earnings problems, either. It's not all grim news though, Alcoa is predicting demand growth of seven percent globally.

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