Alcoa Shares Increase After Earnings Beat Estimates

Alcoa Inc opened the first quarter earnings season reporting a drop in adjusted profit for the first quarter, as prices on aluminum fell. However, earnings were ahead of expectations by analysts and shares of the aluminum producer were up in afterhours trading.

After-tax income was up in the solutions and engineered products segment, which is the area that sells cast metal products such as auto parts. The income was up from $173 million to $189 million.

The news was better than Wall Street was expecting, with the top line slightly lower than estimates but the company’s bottom line significantly better, said on Wall Street analyst.

Low prices have been weighing down Alcoa and other producers of aluminum. That has pushed lower expenses by shuttering capacity of the higher-costing smelting.

The company’s downstream segment, which has products for sales such as aircraft fuselages and truck wheels, of late has been more profitable that the upstream segment of refining aluminum, smelting alumina and mining bauxite.

The New York based company has operations across the globe and said its recent project expansion in Tennessee and Iowa should increase the company revenue for the automotive sheet by six fold from last year to over $1.3 billion during 2018.

Demand from automakers for aluminum is increasing quickly as they look to improve vehicle fuel efficiency through the development of vehicles such as the next-generation aluminum intensive F-150 pickup from Ford Motor Co. that was unveiled this past January.

Over the short-term, solutions and engineered products has its target on earnings after taxes of $200 million or higher for the second quarter, William Oplinger the CFO said during a call with investors and analysts.

Alcoa believes the global market for aerospace will grow by as much as 9% during 2014, which would be up from the 8% it had forecasted back in January. That belief is thanks to the regional jet and large commercial airplanes and the continued growth in the jet market for businesses.

Alcoa for some time has been the first company in the S&P 500 to report quarterly results and since its main product, aluminum is used by many key industries, which includes aerospace, construction, and automotive, some see the company as a bellwether for earnings season.

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