Alcoa starts earnings season with surprise profit

(MoneyWatch) Aluminum giant Alcoa (AA) unofficially kicked off first-quarter earnings season with a surprise profit despite the effects of the European recession, slower growth in China, and a glut of metal on the global market. The news, coming from the first member of the Dow Jones Industrial Average to report this season, could be a balm for the stock market, which logged its fifth losing day in a row Tuesday.

Alcoa posted a quarterly profit of $94 million, or 9 cents a share, down sharply from year-ago earnings of $308 million, or 27 cents. The decline was good news, however, as analysts expected Alcoa to record a net loss of 4 cents a share, according to a survey by Thomson Reuters.

Revenue also eclipsed Wall Street's forecast, rising slightly to $6 billion, from $5.96 billion in last year's first quarter. The surprise profit came partly thanks to improved productivity and more stable markets, said CEO Klaus Kleinfeld in a statement.

Alcoa has been struggling in part because of a glut of aluminum on the global market. The economically sensitive metal -- used in everything from planes, trains, and automobiles to construction and consumer electronics -- has seen its price drop year-over-year on weaker demand from China and Europe.

At the same time, Chinese companies are still churning out large quantities of aluminum, further depressing prices. Additionally, higher costs for transportation and energy are squeezing Alcoa's bottom line. In January, the company said it would slash smelting capacity by 12 percent, idling plants to reduce costs and boost margins.

Although average aluminum prices are up approximately 5 percent in the first three months of 2012, they're still well below their highs of last year, said analysts at Trefis in a report to clients. An improving economic situation in the U.S. and a modest recovery from the European debt crisis helped prices bounce back from a 17-month low in December, Trefis notes, but then China cut its economic growth forecast, which capped the price gains.

Alcoa provided an upbeat start to what is expected to be the weakest corporate earnings season since the financial crisis of 2008. Analysts, on average, forecast companies in the S&P 500 to post year-over-year profit growth of just 3.2 percent. Excluding results from Apple (AAPL), the world's biggest publicly traded company, earnings are expected to increase a meager 1.8 percent.

Alcoa saw its shares spike more than 5 percent in after-hour trading. The stock finished the regular session off 2.9 percent, or 28 cents, at $9.32.