October 13, 2011

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Light Metal and Light Earnings

Alcoa (AA,$AA) Misses Earnings Big Time, ValuEngine Rates the Stock a Hold
Third Quarter earnings' season got off to an inauspicious start on Tuesday when Alcoa (AA,$AA) missed their mark by a whopping 33%. However, analysts argue that the miss had more to do with currency exchange rates and transactions than the underlying business so the stock did not take that big a hit. The company has maintained demand forecasts for the rest of the year. Currently, shares are down around 5% from Tuesday--and some of that decreases is most likely due to the sell off in Basic Materials more generally so far today. Alcoa Inc. is the world's leading producer and manager of primary aluminum, fabricated aluminum and alumina facilities, and is active in all major aspects of the industry. Alcoa serves the aerospace, automotive, packaging, building and construction, commercial transportation and industrial markets, bringing design, engineering, production and other capabilities of Alcoa's businesses to customers. In addition to aluminum products and components, Alcoa also markets consumer brands including Reynolds Wrap foils and plastic wraps, Alcoa wheels, and Baco household wraps. Among its other businesses are closures, fastening systems, precision castings, and electrical distribution systems for cars and trucks.

ValuEngine has issued a HOLD recommendation for ALCOA INC on Oct. 13, 2011. Based on the information we have gathered and our resulting research, we feel that ALCOA INC has the probability to ROUGHLY MATCH average market performance for the next year. The company exhibits ATTRACTIVE company size and market valuation, but UNATTRACTIVE risk and momentum. Based on available data as of Oct. 13, 2011, we believe that AA should be trading at $20.93. This makes AA 51.97% undervalued. Fair Value indicates what we believe the stock should be trading at today if the stock market were perfectly efficient and everything traded at its true worth. For AA, we base this on actual earnings per share (EPS) for the previous four quarters of $1.09, forecasted EPS for the next four quarters of $1.44, and correlations to the 30-year Treasury bond yield of 3.21%.
ValuEngine Forecast
Target Price* 1-Month 3-Month 6-Month 1-Year 2-Year 3-Year 10.26 10.35 10.36 10.45 10.64 11.12 Expected Return 2.07% 2.95% 3.09% 3.99% 5.85% 10.67%

Valuation & Rankings

Valuation 1-M Forecast Return 12-M Return Sharpe Ratio 5-Y Avg Annual Return Volatility Expected EPS Growth Market Cap (billions) Trailing P/E Ratio Forward P/E Ratio PEG Ratio Price/Sales Market/Book Beta Alpha 51.97% undervalued 2.07% -23.28% -0.40 -21.13% 52.79% 31.30% 10.67 9.19 7.00 0.29 0.45 0.76 2.11 -0.3 Valuation Rank 1-M Forecast Return Rank Momentum Rank Sharpe Ratio Rank 5-Y Avg Annual Rtn Rank Volatility Rank EPS Growth Rank Size Rank Trailing P/E Rank Forward P/E Ratio Rank PEG Ratio Rank Price/Sales Rank Market/Book Rank Beta Rank Alpha Rank 12 27 28 28 29 48 62 92 83 85 79 77 80 88 93

ValuEngine Market Overview

Summary of VE Stock Universe
Stocks Undervalued Stocks Overvalued Stocks Undervalued by 20% Stocks Overvalued by 20% 91.89% 8.11% 70.66% 3.11%

ValuEngine Sector Overview

Sector
Utilities Consumer Staples Retail-Wholesale Aerospace Multi-Sector Conglomerates Finance Business Services Transportation Consumer Discretionary Computer and Technology Medical Industrial Products Construction Auto-Tires-Trucks Basic Materials Oils-Energy

Change
1.90% 1.61% 3.50% 2.56% 2.46% 3.53% 3.69% 3.28% 2.74% 3.78% 1.88% 3.38% 3.86% 5.47% 1.27% 3.10%

MTD
2.04% 1.91% 3.96% 2.88% 2.74% 3.95% 4.13% 3.70% 3.15% 4.29% 2.20% 3.81% 4.26% 6.08% 1.56% 3.58%

YTD
-8.52% -20.87% -9.67% 0.01% -22.79% -17.20% -14.30% -23.97% -21.01% -17.86% -11.10% -24.68% -31.99% -37.32% -31.08% -28.97%

Valuation
14.90% undervalued 24.35% undervalued 25.17% undervalued 27.40% undervalued 27.65% undervalued 28.11% undervalued 28.42% undervalued 30.45% undervalued 31.82% undervalued 32.28% undervalued 33.01% undervalued 34.16% undervalued 36.04% undervalued 36.49% undervalued 37.64% undervalued 37.83% undervalued

Last 12- P/E MReturn Ratio

-0.19% -3.71% 6.27% 0.37% -5.35% -7.79% -4.70% -7.52% -6.59% -6.38% -2.11% -2.55% -19.96% -5.56% -5.36% -5.20% 22.96 15.33 23.18 16.05 20.00 22.67 34.97 18.86 22.94 30.84 23.96 20.19 33.74 15.49 27.00 31.06