- The Washington Times - Thursday, March 19, 2009

HARTFORD, CONN. (AP) - Shares of Alcoa Inc. jumped Thursday as an analyst said the aluminum maker’s dividend cut now gives it enough cash for the rest of the year.

Analyst Michael F. Gambardella of JPMorgan North America Equity Research upgraded Alcoa shares, raised his profit estimates and increased his price target.

Alcoa has now “bought itself a year’s worth of liquidity insurance to make it comfortably through 2009,” he said in a note to investors.

He raised his 2009 earnings estimate to a $1.46 loss, improved from a $1.90 loss. And he estimates that Alcoa will earn 80 cents per share in 2010.

Analysts surveyed by Thomson Reuters expect, on average, a loss of 73 cents per share this year and a profit of 43 cents per share in 2010.

Gambardella also raised his price target to $12 from $8.

The Pittsburgh company announced Monday it is slashing its quarterly dividend for the first time in more than a quarter century to lower costs and bulk up its cash cushion in the weakening economy.

In addition to the 82 percent dividend cut, Alcoa said it expects to sell $1.1 billion worth of stock and debt and reduce annual costs by more than $2.4 billion by 2010.

“Despite potential aluminum market headwinds that could persist through 2009 keeping a lid on aluminum prices, we believe Alcoa’s equity will soon look past 2009 and into 2010” when aluminum prices could recover, Gambardella said.

“The biggest drivers of this change are better-than-expected cost savings in the upstream businesses and the higher share count making net income losses smaller,” he said.

Shares rose 52 cents, or 9.5 percent, to $6 in morning trading.

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