ALCOA NYSE-AA

TIMELINESS
SAFETY
TECHNICAL

5
3
5

RECENT
PRICE
High:
Low:

Lowered 11/7/08

22.4
16.1

20.3
14.5

41.7
18.0

LEGENDS
12.0 x Cash Flow p sh
Lowered 12/12/08 . . . . Relative Price Strength
2-for-1 split 2/99
BETA 1.40 (1.00 = Market)
2-for-1 split 6/00
Options: Yes
2011-13 PROJECTIONS
Shaded area: prior recession
Annl Total Latest recession began 12/07

5.7 RELATIVE
DIVD
Median: 20.0) P/E RATIO 3.62 YLD 5.6%
12.12 P/ERATIO 44.9(Trailing:

43.6
23.1

45.7
27.4

39.8
17.6

38.9
18.5

39.4
28.5

32.3
22.3

37.0
26.4

48.8
28.1

44.8
6.8

VALUE
LINE
Target Price Range
2011 2012 2013

Lowered 2/2/96

64
48
40
32
24
20
16
12

2-for-1

Price
Gain
Return
High
30 (+150%) 29%
Low
20 (+65%) 17%
Insider Decisions
to Buy
Options
to Sell

F
0
1
1

M
0
0
0

A
1
0
0

M
0
2
3

J
0
0
0

J
1
0
0

A
0
0
1

S
0
0
0

O
1
0
0

8
6
% TOT. RETURN 12/08

Institutional Decisions
1Q2008
2Q2008
3Q2008
289
303
280
to Buy
to Sell
392
374
391
Hlds(000) 651965 651801 627430

Percent
shares
traded

24
16
8

1 yr.
3 yr.
5 yr.

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
13.84 12.81 13.86 17.72 18.93 19.79 20.91 22.19 26.50 26.97 23.99 24.76 26.96 30.06
1.28
1.07
1.21
2.13
1.88
2.25
2.33
2.66
3.13
2.97
2.25
2.56
2.92
2.90
.28
.10
.27
1.11
.79
1.09
1.21
1.41
1.81
1.46
.92
1.21
1.53
1.43
.20
.20
.20
.23
.33
.25
.38
.40
.50
.60
.60
.60
.60
.60
1.15
1.07
.86
1.26
1.44
1.36
1.27
1.25
1.30
1.39
1.50
.99
1.31
2.44
5.17
4.99
5.52
6.22
6.39
6.48
8.18
8.51 13.13 12.46 11.69 13.84 15.21 15.30
685.84 706.89 714.85 705.26 690.04 673.10 733.62 735.50 865.52 847.59 844.82 868.49 870.98 870.27
31.0
87.1
36.3
11.0
18.9
17.1
14.8
20.4
17.6
25.3
32.3
21.6
21.5
19.5
1.88
5.15
2.38
.74
1.18
.99
.77
1.16
1.14
1.30
1.76
1.23
1.14
1.04
2.3%
2.3%
2.1%
1.8%
2.2%
1.3%
2.1%
1.4%
1.6%
1.6%
2.0%
2.3%
1.8%
2.1%
CAPITAL STRUCTURE as of 9/30/08
Total Debt $8424.0 mill. Due in 5 Yrs $2800.0 mill.
LT Debt $8370.0 mill. LT Interest $400.0 mill.
(Long-term interest earned: 11.9x)
(Total interest coverage: 11.3x)
(36% of Capl)
Uncapitalized Annual rentals $315.0 mill.
Pension Assets 12/07 $10.7 bill. Oblig. $11.6
bill.
Pfd Stock $55.0 mill. Pfd Divd $2.0 mill.
Common Stock 800,317,368 shs.
MARKET CAP: $9.7 billion (Large Cap)
CURRENT POSITION 2006
2007
($MILL.)
Cash Assets
506
483
Receivables
3435
3053
Inventory (LIFO)
3805
3326
Other
1411
1224
Current Assets
9157
8086
Accts Payable
2680
2787
Debt Due
510
202
Other
4091
4177
Current Liab.
7281
7166

9/30/08

15340
17.3%
856.2
853.0
32.0%
5.6%
1756.8
2877.0
6055.9
10.6%
14.1%
9.8%
31%

16323
17.3%
901.0
1054.0
29.9%
6.5%
1797.0
2657.0
6318.0
12.8%
16.7%
12.1%
28%

22936
18.8%
1219.0
1489.0
33.5%
6.5%
d376.0
4987.0
11422
10.3%
13.0%
9.4%
28%

22859
15.4%
1253.0
1263.0
33.3%
5.5%
1789.0
6388.0
10614
8.5%
11.9%
7.1%
41%

20263
13.1%
1116.0
785.0
33.8%
3.9%
1852.0
8365.0
9927.0
5.2%
7.9%
2.8%
65%

21504
13.4%
1194.0
1034.0
24.2%
4.8%
1656.0
6692.0
12075
6.3%
8.6%
4.3%
50%

23478
14.4%
1204.0
1340.6
25.5%
5.7%
1195.0
5346.0
13300
7.8%
10.1%
6.2%
39%

26159
14.0%
1267.0
1259.3
34.6%
4.8%
1422.0
5279.0
13373
7.6%
9.4%
5.5%
42%

THIS
STOCK

VL ARITH.
INDEX

-68.3
-59.2
-67.0

-37.4
-26.7
-8.2

VALUE LINE PUB., INC.

11-13

34.94 37.16 34.65 29.40 Sales per sh

4.39
4.63
2.85
2.20 Cash Flow per sh
2.90
2.95
1.25
.60 Earnings per sh A
.60
.68
.68
.68 Divds Decld per sh B
3.68
4.39
4.00
3.50 Capl Spending per sh
16.76 19.29 20.00 19.65 Book Value per sh C
869.54 827.40 800.00 800.00 Common Shs Outstg D
10.4
12.4
22.9
Avg Annl P/E Ratio
.56
.65
1.44
Relative P/E Ratio
2.0%
1.9%
2.4%
Avg Annl Divd Yield

35.00
3.35
1.65
.74
3.15
21.20
800.00
15.0
1.00
3.0%

30379 30748
17.9% 15.5%
1280.0 1268.0
2540.0 2564.0
25.1% 37.8%
8.4%
8.3%
1876.0 920.0
4778.0 6371.0
14631 16016
14.0% 12.3%
17.4% 16.0%
13.8% 12.4%
21%
23%

28000
13.0%
1250
1325
30.0%
4.7%
900
5825
17075
6.5%
7.8%
4.5%
45%

27700
12.0%
1275
1015
30.0%
3.7%
950
7570
16115
5.0%
6.3%
3.0%
54%

23500
11.0%
1275
470
29.0%
2.0%
925
7510
15825
3.0%
3.0%
NMF
NMF

Sales ($mill)
Operating Margin
Depreciation ($mill)
Net Profit ($mill)
Income Tax Rate
Net Profit Margin
Working Capl ($mill)
Long-Term Debt ($mill)
Shr. Equity ($mill)
Return on Total Capl
Return on Shr. Equity
Retained to Com Eq
All Divds to Net Prof

BUSINESS: Alcoa is a global leader in aluminum production, serving the aerospace, automotive, building and construction, commercial transportation and industrial markets. Sold the consumer and
packaging division during 1Q 2008. Has more than 300 operating
and sales locations in over 40 countries. 2007 revenues by segment: Alumina and Aluminum, 30%; Transportation, 25%; Packag-

ing, 24%; other, 21%. Foreign sales : 45% of total. Has about
107,000 employees. Capital World Investors owns 5.8% of common stock, State Street Global Advisors, 4.2%, officers and directors own less than 2% (3/08 Proxy). Chairman: Alain J.P. Belda. Incorporated: PA. Address: 201 Isabella St., Pittsburgh, PA. 15212.
Telephone: 412-553-4545. Internet: www.alcoa.com.

Alcoa is cutting costs. It will eliminate

about 15,000 jobs, close more plants, sell
ANNUAL RATES Past
Past Estd 05-07 assets, and cut expenditures to cope with
of change (per sh)
10 Yrs.
5 Yrs.
to 11-13
tough economic times. In essence, the comSales
6.0%
5.5%
.5%
pany is reducing capacity to meet declinCash Flow
6.5%
7.5%
-3.0%
Earnings
9.5% 11.5%
-6.0%
ing demand for aluminum, especially in
Dividends
9.0%
2.0%
3.0%
the automotive sector.
Book Value
10.5%
6.5%
3.5%
Lowered demand for aluminum is
QUARTERLY SALES ($ mill.)
CalFull decreasing the price paid to Alcoa.
endar Mar.31 Jun.30 Sep.30 Dec.31 Year The automotive, aerospace, and construc2005 6226 6698 6566 6669 26159 tion industries are going through cyclical
2006 7244 7664 7631 7840 30379 downturns. The depth and length of the
2007 7908 8066 7387 7387 30748 pullback are uncertain.
2008 7375 7620 7234 5471 27700
2009 5300 5700 6000 6500 23500 Rising aluminum inventories may
mean that pricing will remain soft for
EARNINGS PER SHARE A
CalFull some time. High-cost production is being
endar Mar.31 Jun.30 Sep.30 Dec.31 Year
replaced
with
lower-cost
production
2005
.40
.46
.33
.24
1.43 worldwide. While this suggests that the
2006
.70
.84
.62
.74
2.90 price of aluminum may stay relatively low
2007
.76
.81
.63
.75
2.95
2008
.37
.66
.33 d.11
1.25 into 2010, we believe that this will also en2009
d.05
.10
.20
.35
.60 courage more consumption by enabling
end-product pricing to come down.
B
QUARTERLY
DIVIDENDS
PAID
CalFull Current results are less certain than
endar Mar.31 Jun.30 Sep.30 Dec.31 Year
usual. The company was scheduled to
2005
.15
.15
.15
.15
.60 release its year-end 2008 results shortly
2006
.15
.15
.15
.15
.60 after we went to press. We expect that
2007
.17
.17
.17
.17
.68 fourth-quarter results and managements
2008
.17
.17
.17
.17
.68
guidance will be subdued, at best.
2009

The global economic slowdown suggests that difficult times may extend
well into 2009. Aluminum pricing has
declined particularity in response to
severe demand weakness in the auto and
truck industry, which is a large user of the
metal. Too, the fall in prices reflects the
lack of credit available in the financial system, making purchases more difficult.
The dividend may need to be scaled
back. Alcoa is now on credit watch at a
major bond-rating agency, likely reflecting
the prospects for lower earnings and cash
flows. Indeed, the current dividend payout
exceeds our lowered earnings-per-share estimate for 2009.
These shares carry our Lowest ranking for Timeliness. The very sluggish
global economic conditions pushed the
shares significantly lower throughout
2008. Various policy initiatives will stimulate economic activity, but the big-ticket,
credit-dependent nature of Alcoas end
markets suggests that demand will improve only slowly. We believe that these
shares are most appropriate for multiyear
investors as part of a diversified portfolio.
Douglas G. Maurer, CFA January 16, 2009

831
3288
3844
1309
9272
2791
54
4198
7043

(A) Primary shares through 96, diluted after.

Excludes nonrecurring items: 92, ($3.91); 93,
(18); 94, 52; 96, (12); 97, 13; 01, (41);
02, 43; 03, (7); 04, (4); 05 (3); 06,

(33). Next earnings report due early April.

(C) Includes intangibles: At 12/31/07 $5888.0
(B) Dividends historically paid in late Feb., mill., $7.12/sh. (D) In millions, adjusted for

May, Aug., Nov. Dividend reinvestment plan stock splits.

available.

2009, Value Line Publishing, Inc. All rights reserved. Factual material is obtained from sources believed to be reliable and is provided without warranties of any kind.
THE PUBLISHER IS NOT RESPONSIBLE FOR ANY ERRORS OR OMISSIONS HEREIN. This publication is strictly for subscribers own, non-commercial, internal use. No part
of it may be reproduced, resold, stored or transmitted in any printed, electronic or other form, or used for generating or marketing any printed or electronic publication, service or product.

Companys Financial Strength

Stocks Price Stability
Price Growth Persistence
Earnings Predictability

A
50
25
60

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