Aluminum producer Alcoa (NYSE:AA) will report first-quarter financial results tomorrow after the market's close.

What analysts say:

  • Buy, sell, or waffle? The 23 analysts following Alcoa are turning slightly bearish, with only 10 rating the stock a buy, nine saying hold, and four issuing a sell rating.
  • Revenues. That could be because revenues are only expected to rise 4% this time around to $7.5 billion. Still, that's a lot of cans.
  • Earnings. Profits, meanwhile, are expected to rise more than 7% to $0.75 per share.

What management says:
Chairman and CEO Alain Belda was breathless in describing last year's results: "(We) took full advantage of the opportunities the market offered, driving revenue, mitigating costs, bringing new products and innovation to the market, expanding our global footprint and growing our customer base. We did this while continuing to invest in modernizing our existing plants and building new operations that will enable us to deliver strong results for years to come."

Breathless, but not bluster. Alcoa was able to generate $1.3 billion in operating cash flows, $400 million of which came from lower working capital levels. While it recorded more than a half-billion dollars worth of charges from a restructuring, the changes should result in $125 million in annual savings.

What management does:
With higher prices for alumina -- the primary component of aluminum -- and aluminum itself, strong demand, lower tax expenses, and a favorable legal settlement, Alcoa has been able to steel itself for future growth. Its profit generation has been equally impressive.

Margin

12/05

3/06

6/06

9/06

12/06

Gross

19.0%

20.0%

21.6%

22.3%

23.1%

Operating

8.5%

9.6%

11.8%

12.8%

14.1%

Net

4.8%

5.8%

6.6%

7.1%

7.4%

Efficiency Ratios

12/05

3/06

6/06

9/06

12/06

Return on Assets

4.1%

4.8%

6.1%

6.8%

7.5%

ROE

9.4%

11.6%

13.2%

14.8%

15.4%

ROIC

6.4%

7.4%

9.3%

10.3%

11.9%

Year-Over-Year Revenue Growth

13.1%

13.9%

16.4%

18.6%

18.8%

YOY Earnings Growth

-8.2%

22.5%

32.5%

51.8%

72.4%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months. Earnings from continuing operations.

One Fool says:
China's supply and demand plays a large role in the outlook for aluminum in 2007, and therefore the financial performance of Alcoa. The Aluminum Corp. of China is purchasing aluminum processing plants over the next few years because it wants to double its capacity to try to meet demand there. That could pose a problem for Alcoa and Alcan (NYSE:AL) because China can mine much of its own alumina and bauxite. Yet, with at least one Chinese industry analyst pegging aluminum demand to jump 28% in 2007 alone, it seems improbable that China can produce all that it needs by itself.

Alcoa's share price has increased dramatically the past six months to near its 52-week highs. That should not be a barrier to further increases, though, because the aluminum producer continues to operate efficiently while commanding top dollar for its products.

For related Foolishness:

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Fool contributor Rich Duprey  does not own any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.