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Alcoa Inc. Message Board

wgrsh 168 posts  |  Last Activity: Sep 12, 2014 4:35 PM Member since: May 11, 2005
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  • Reply to

    This action is stupid

    by iahphx Sep 12, 2014 1:37 PM
    wgrsh wgrsh Sep 12, 2014 4:35 PM Flag

    I'll give it a thumbs up too ... and yours.

  • Reply to

    The Barrons/Wolfe Research piece is very good

    by iahphx Sep 12, 2014 2:18 PM
    wgrsh wgrsh Sep 12, 2014 3:34 PM Flag

    I agree ... Venezuela and Wright are just things that have to be managed through. This isn't the first time Parker had to compete with LUV. And the Wright amendment has been watered down over the years. A 10% drop in fuel is over $1.2 billion ... that can overcome a lot of problems too. Plus a better economy is never bad for the airlines.

  • Reply to

    The Barrons/Wolfe Research piece is very good

    by iahphx Sep 12, 2014 2:18 PM
    wgrsh wgrsh Sep 12, 2014 3:10 PM Flag

    The Wright amendment has been out there. A number of weeks ago Kirby made a comment about it on TV ... generally what Keay said. And I agree with Keay about not getting credit for 2015 estimates yet (2015 estimates right now look like this year's eps plus $900 billion in synergies). I can throw in also AAL is not getting credit for the potentially lower fuel costs if the dollar keeps its strength ... which is looking more likely that it is not going to be temporary.

    But the market is looking at the glass half empty with Venezuela and the Wright Amendment. You have to have faith that Parker can compete.

    I've wondered about currency risk from the stronger dollar, and don't know ... so worry. But DAL made the comment they have a natural hedge with their partners ... not sure if AAL can say the same. Currency risk is a one time deal once currencies stabilize.

  • wgrsh wgrsh Sep 12, 2014 2:38 PM Flag

    I agree, lower commodities should help the consumer and that should help the economy in a non inflationary way. Long term rates should just ease up without an inflationary premium steepening the yield curve giving the Fed some wiggle room. What a scenario!

    And I like the guy from the CME who made the comment that if WTI broke $90, it could be a quick trip to $75-80 ... but who knows ... we'll find out.

  • Got a little reverse head and shoulders ... should take us to $11 ... and see how things look then. Fundamentals are improving.

  • Reply to

    oil may go under

    by fredd008 Sep 10, 2014 9:06 PM
    wgrsh wgrsh Sep 11, 2014 11:50 AM Flag

    I'll take $70 oil ... no problem with that.

    One caveat that I only hear once in a while relating to the profitable level of oil is that production is very energy intensive, so as the price of oil drops the breakeven level drops along with it. If that "wonderful" day ever comes when oil breaks $70, we'll find out who wants to produce at less than that.

    We'll all be happy with just a decrease of just 10% off the costs used in the eps estimates that are out there.

    Second caveat ... what iahphx says is true ... who knows what oil will do next? Oil has done this in the past and each time it was a head fake ... so, until the world resolves the "financialization" issues ... who knows? This time, there is something going on with "all" commodities though.

  • Reply to

    Oil ... big story

    by wgrsh Sep 10, 2014 11:05 AM
    wgrsh wgrsh Sep 10, 2014 7:33 PM Flag

    airline ... yup, I know ... jet fuel is a short step away from type II heating oil. I was just hyping off a 3 year chart of gasoline and heating oil looking for breakdowns ... just amazing the way these commodities are dropping. Though with oil and oil products dropping ... jet fuel should generally follow, and it looks like they are dropping enough to make seasonal variations just noise. Amazing ... a 10% drop is about a $1.3 billion/year cost savings for AAL ... I don't think that is factored into 2015 earnings yet. This is not just an oil story as far as commodities go.

    Might even see some benefit in Q4 ... and Venezuela will be there so AAL could use some help (that might be the last quarter of Venezuela comparison problems ... though there will still be things to resolve.

  • Reply to

    Oil ... big story

    by wgrsh Sep 10, 2014 11:05 AM
    wgrsh wgrsh Sep 10, 2014 11:55 AM Flag

    A stronger dollar moves oil down. A weakening dollar such as in the 1970s and mid 2000s pushes oil up.

    And it will be good to have the geo-political risk out of oil too.

    Re: the Chinese ... back in June the Chinese started to looked into commodity fraud over the last 10 years. Fake supply and demand to use as collateral for bank loans done with derivative swaps. Wow ... the world was using a lot of commodities ... or were they? These derivative swaps (unregulated in 2000) screwed things up. So far the Chinese found this fraud with gold, but where there is one cockroach ... you know the saying.

    I don't know who in the world has a true picture of the world with all this garbage, but I do know lower oil is good for airlines ... best for unhedged airlines like AAL.

  • wgrsh wgrsh Sep 10, 2014 11:30 AM Flag

    And AAL sold off all their hedges at $112 oil ... got to love it.

  • AAL uses 4.3 billion gallons of jet fuel. The last time gasoline was this low, heating oil was at $2.70. Many are calling for another 10% coming off oil. Below $2.70 there is a lot of air ... who knows where it will go. 2015 could very well have jet fuel off 20 cents ... if not more than what 2015 eps estimates are using. That is an extra $860 million in cost savings to the bottom-line. AAL already is guiding for flat non-fuel CASM in 2015. Things look good.

    I don't know when the market will move the stock, but this is hugely material.

  • Reply to

    Sell the rumor example ...

    by wgrsh Sep 9, 2014 10:25 AM
    wgrsh wgrsh Sep 9, 2014 2:09 PM Flag

    The low p/e saved us ... I'm glad they lowered the range even if they feel they'll hit the high end, since it should go a long ways to manage expectations. After their initial Q3 guidance after the CC for Q2, estimates didn't come down very much ... actually, back then I got about $1.75 using midpoint cost guidance and yahoo revenue estimates, so current estimates are still on the high side ... but figuring eps estimates that way, yields a wide range. Anyway, using any eps in the range, AAL is still at relatively low p/e.

    You may want to reconsider your rounding error thoughts. With 10% margins, a 1% revenue/cost move changes eps 10%. However if you are looking at it from the point of view that it just something that has to be responded to by management by making adjustments ... then I agree. And most airlines have already started to respond by announcing capacity reductions.

  • Reply to

    Lower oil = Higher Airlines

    by melodias23 Sep 8, 2014 12:59 PM
    wgrsh wgrsh Sep 9, 2014 12:41 PM Flag

    Commodities are just getting crushed. I don't have a daily NY jet fuel figure, but heating oil is trading near 2.79 ... gold, ags, all down. If heating oil breaks this area, 2.70 is next. If it is all dollar related, that is expected to last. And if it lasts through next year you can add a buck to next year's estimates. The market can only ignore this for so long.

  • Reply to

    If we don't go up tomorrow then

    by hedmal Sep 9, 2014 1:08 AM
    wgrsh wgrsh Sep 9, 2014 10:45 AM Flag

    Welcome back uncle. I think hedmal was just referring to UAL being one of first airlines to move out of the "doldrums". Obviously, the market is giving UAL credit for higher potential earnings than the current estimates merit for this year or next year. The market hasn't been giving AAL credit for their potentially higher earnings yet (or even current estimates for that matter). Sentiment will change for AAL as well, but I don't know when.

  • The stock has been in the doldrums before the report, selling at a multiple that must have anticipated even worse numbers. The numbers weren't great, but certainly not bad enough to justify the extent of the recent doldrums. Buy the fact ... though I don't have the faintest idea how the stock will end the day. I do know AAL's multiple is low given earnings with these numbers.

    Plus, the price doesn't reflect next year's synergies, or the possibility of lower fuel going into next year, both of which are material ... potentially, very material.

    EPS for the quarter should come down a bit, (but we knew that after they reported Q2 and they gave guidance for Q3) ... still the multiple is low.

  • Reply to

    Oil closing in on $92 this morning.

    by airline_executive Sep 8, 2014 9:52 AM
    wgrsh wgrsh Sep 8, 2014 10:05 PM Flag

    In the recent past, the story always was lower gas prices would increase demand and drive the price up ... maybe, never had a chance to see that ... we have a lot of supply now. For the most part, the current drop in oil can be explained by dollar strength ... If it was due to something else, then we still have dollar strength to come out of oil. Some think we still have almost 10% more dollar strength to go. Then if the cftc ever gets their act together without watering down what they say they are going to do, their estimates are that oil has a 20-25% speculative/manipulation premium in it. I don't know if you follow what the CFTC is planning.

    High priced oil slowed economies, no doubt. The EU, like the CFTC, is wanting to get rid of commodity manipulation not only for oil but also food for the rest world. These position limits/aggregation rules impact energy, metals, and 28 ags. Many are dropping, possibly in anticipation of the rules. And many don't have the "supply" story that oil, corn, etc have.

    I'll take whatever drop we can get ... every dime drop in fuel for a year puts over $400 million on the bottom-line.

  • Reply to

    Oil closing in on $92 this morning.

    by airline_executive Sep 8, 2014 9:52 AM
    wgrsh wgrsh Sep 8, 2014 10:55 AM Flag

    And besides the benefit of cost savings, a sustained drop in oil will benefit the economy leading to a better business/leisure mix which should help revenue.

    (The sustained high commodity prices we've had, I believe, is a contributing cause to the malaise in the economy (world economy). I can't believe they've allowed these commodity derivative rules to keep getting blocked and delayed for the last 5 years.)

  • Reply to

    Oil closing in on $92 this morning.

    by airline_executive Sep 8, 2014 9:52 AM
    wgrsh wgrsh Sep 8, 2014 9:58 AM Flag

    I haven't worked it out in a while, but in round numbers, a dime drop in jet fuel covers a 1% prasm decline. Or, other things being equal, a dime change in jet fuel will increase margins 1% ... for those airlines without hedging losses.

  • Reply to

    Someone in the pre market

    by getintoh20 Sep 8, 2014 8:56 AM
    wgrsh wgrsh Sep 8, 2014 9:47 AM Flag

    Looks like buying pressure, at least initially. There were some up grades for some airlines. Also, it could be that oil is getting more than just a cursory look.

    There was a Bloomberg article on the oil speculation and the new rules (position limits/aggregation rules) and those requesting exemptions from the rules ... (asking for the ability to keep manipulating ... can't believe these guys) Can do a search for "Bloomberg, CFTC, BP" to find the article.

  • Reply to

    Confused UAL vs AAL

    by newmillennium2003 Sep 5, 2014 10:59 AM
    wgrsh wgrsh Sep 5, 2014 5:22 PM Flag

    cav ... UAL can catch up as you say ... they still have to follow through, but they can do it. Many airlines have room to run especially as we approach the prospects of 2015 and the prospect of lower fuel.

  • Reply to

    dumb seller keeps hitting this stock

    by iahphx Sep 5, 2014 2:30 PM
    wgrsh wgrsh Sep 5, 2014 3:55 PM Flag

    That's probably good advice to anyone that is going to buy ... wait until Tuesday. Having said that, in the Cowen presentation on Sept 3, AAL specifically said they continue to produce superior financial results and those comments recognized the environment of Venezuela and international capacity. Those comments were under the slide talking about Q2 results, but Venezuela wasn't a factor in Q2 and they mentioned Venezuela.

    Anyway, a 1% blip in prasm for a whole quarter is 12-14 cent off eps. If it only lasts for a quarter, it's history.

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