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Companies have jump-started the 2010 earnings season

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Yesterday we saw first-quarter earnings from Alcoa (the largest U.S. aluminium producer) and Intel (the world’s biggest maker of computer chips). The conclusion is mixed signals of the recovery.


The company showed better than expected earnings and sales compared to same period last year. First-quarter earnings was 43 cents compared to 11 cents a share in the same period last year. This clearly shows signs of increased IT-spending from consumers and businesses.


The showed lower-than-expected first-quarter sales that show the capital goods industry is not recovering as fast as expected. Does an increase in sales of 18 percent not tell the market that the economy is recovering? No, not really. The problem is that aluminium prices gained 57 percent from a year earlier so would have expected higher sales. The problem is that the quantities of aluminium is going down. The recovering needs to be based on increases in quantities not rising prices. We want production to rise otherwise the recovery is only numbers increasing from monetisation and low interest rates – which is not a sustainable recovery.


Both companies show good signs of growth in terms of sales and earnings which is ultimately what drives the market forward. The problem is that Alcoa is not showing increases in sales in terms of quantity which is really what matters. Alcoa is a key supplier to the capital goods industry and therefore a leading indicator of future increases in production. Therefore the two reports from Intel and Alcoa give a mixed signal about the recovery. We will be posting updates on the Nordic companies as they report first-quarter earnings.


Written by Peter Garnry

14. April 2010 at 11:26

Posted in Stocks

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