Alcoa Earnings More Than Double on Higher Demand
Aluminum giant Alcoa (AA) kicked off second-quarter earnings season with a bang after net income more than doubled thanks to higher metal prices and stronger demand from global customers ranging from General Motors (GM) to Airbus.
The near ubiquity of aluminum in manufacturing, construction and transportation products makes Alcoa, the largest U.S. aluminum producer, something of a bellwether for the health of the global economy. While Wall Street was expecting those strong earnings, Alcoa's revenues came in above analysts' predictions.
After the markets closed Monday, the Pittsburgh company said net income more than doubled to $322 million, or 28 cents a share, up from $136 million, or 13 cents, recorded in last year's second quarter.
Excluding charges for restructuring a debt offer and other items, earnings from continuing operations came to 32 cents a share, which matched Wall Street's average forecast, according to data from Thomson Reuters. Alcoa, a component of the Dow Jones Industrial Average, had exceeded the Street's profit forecasts for four straight quarters until now.
Revenue for the three months ended June 30 rose 27 percent to $6.95 billion from $5.19 billion in the prior-year period, easily topping analysts' estimate for $6.31 billion in revenue.
The global economic recession forced Alcoa to slash thousands of jobs and cut production over the past couple of years, hence its emphasis on earnings from continuing operations. The restructurings are credited with helping the streamlined company to cash in on the rebound in global demand from automakers, construction companies and aerospace firms, among other industries.
"Although the economic recovery is uneven, the overall outlook for Alcoa -- and for aluminum -- remains positive," Chief Executive Klaus Kleinfeld said in a media release. The CEO affirmed Alcoa's outlook for global demand to increase 12 percent in 2011 and double by the end of the decade as China and other emerging markets erect more buildings and buy more planes, trains and automobiles.
Higher prices for the lightweight metal also boosted results. The primary aluminum price continued to improve through the second quarter to hit an average price of $1.19 a pound, up from $1.15 a pound in the first quarter and 96 cents a pound in the second quarter of last year, said John Redstone, an analyst with Desjardins Capital Markets, in a note to clients ahead of Alcoa's report.
Shares in Alcoa fell sharply Monday along with the rest of a stock market grappling with the impasse over the debt ceiling, the crisis in the euro zone and last week's dismal employment report. Alcoa's stock has gained more than 45 percent over the last 52 weeks but is essentially flat for the year-to-date.
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