Alcoa Inc stock see-sawed on Wednesday, with some on Wall Street seeing the aluminum producer's second consecutive quarterly loss as the glass being half full and others as half empty.

Analysts were split over whether the company's cost-cutting and strengthening of liquidity were positive enough to outweigh the negative longer-term fundamentals of the aluminum industry in the current economic downturn.

While we think Alcoa has potential as a long-term special situation turnaround given ongoing cost reductions and projected improvement in free cash flow, we think shares are overvalued given our reduced earnings outlook, Standard & Poor's Equity Research analyst Leo Larkin said in a note.

He widened his full-year 2009 loss estimate to $1.35 per share from $1.04 and reduced the 2010 earnings estimate to 41 cents per share 54 cents to reflect continued weak aluminum market conditions.

S&P also cut Alcoa's investment rating to sell from hold, but kept its $7 share target price.

However, UBS analyst Brian MacArthur was impressed by results in Alcoa's Engineered Products business, which he said were better than expected. He also noted the company expects to achieve additional cost savings by the end of the year.

MacArthur raised Alcoa's share price target to $8.25 from $7.25, but BMO Nesbitt Burns cut its target to $7 from $8.

BMO Research estimates that under our current commodity price assumption, Alcoa faces seven quarters of losses, wrote analyst Tony Robson.

He characterized Alcoa's results as negative and rated the company stock to underperform reflecting weak aluminum prices, building inventories and poor earnings outlook.

After the market closed on Tuesday, Alcoa, the largest U.S. aluminum producer, reported a first-quarter net loss of $497 million, or 61 cents per share, compared with a profit of $303 million, or 37 cents per share, a year earlier. [nN07485652]

But Chief Executive Officer Klaus Kleinfeld said there were signs of bottoming or stabilizing in its end markets, even though it projects weak global demand for aluminum this year.

Cost-cutting in the quarter was more than I expected, said analyst Charles Bradford of Bradford Research, who changed his full-year estimate for Alcoa to a loss of $1.50 from a loss of $2.10.

Bradford was also impressed by Alcoa's actions during the last six months when aluminum demand stalled and the price of the metal slumped. The company cut production by around 20 percent, slashed its dividend and raised $1.3 billion through a public offering.

But Tony Rizzuto of Dahlman Rose lowered his 2009 estimate to a loss of $1.00 from a loss of 45 cents due to a more restrained outlook for 2009.

While we do remain somewhat concerned about the prospects for aluminum over the near to intermediate term, we believe the longer-term outlook remains somewhat more positive, and Alcoa should trade along with these industry fundamentals, he wrote in a research note.

They are doing all the right things to preserve liquidity, but market fundamentals are pretty bad, said Min Ye, of Morningstar in Chicago. Positive news is that prices seem like they have leveled off, but demand has not picked up and inventories are high.

Alcoa shares closed 1.5 percent lower at $7.79 on the New York Stock Exchange before the results were announced on Tuesday and fell to $7.55 in after-hours trading. But they rose 3.1 percent in premarket trading on Wednesday and over 4 percent when the NYSE opened. In early afternoon trading, the stock was down 4 cents at $7.75.

(Editing by Andre Grenon)