Alcoa Beats by a Penny and Raises Its Volume Outlook

AlcoaAluminum giant Alcoa's (AA) second-quarter earnings topped Wall Street's forecast by a penny (which is mostly zinc) a share. More important, the company raised its 2010 volume forecast. As the first of the 30 Dow companies to report, Alcoa by tradition unofficially kicks off earnings season, while its results offer clues into global industrial demand.

Alcoa attributed the better-than-expected profits to higher volume, cost savings and currency exchange, among other factors, which more than made up for lower aluminum prices, the company said after Monday's closing bell.

For the three months ended June 30, Alcoa said it swung to a second-quarter profit from continuing operations of 13 cents a share, versus a year-ago loss of 32 cents. Analysts', on average, forecast earnings of 12 cents a share, according to data from Thomson Reuters.

Rising Aluminum Consumption

The largest U.S. aluminum company said revenue for the three months ended June 30 rose 6% to $5.2 billion, helped by higher aluminum shipments, among other factors. Analysts' average sales estimate stood at $5.05 billion, according to Thomson Reuters.

"The top and bottom line growth was driven by higher volumes from stronger end markets and continued gains from our productivity programs," CEO Klaus Kleinfeld said in a press release.

Based on improved end-market demand, Alcoa raised its projection for aluminum consumption to 12% from 10% this year.

"Despite the weakness in the price of aluminum, the physical market is improving," wrote John Redstone, an analyst with Desjardins Securities, in a note ahead of Alcoa's earnings report. Inventories have stabilized year to date, the analyst added, indicating that "supply and demand are roughly in balance."

Shares in Alcoa jumped more than 3% in after-hours trading. In the regular session, Alcoa slipped fractionally, or 7 cents, to finish at $10.87. For the year to date, Alcoa is off 33% versus a 2.3% drop in the Dow Jones Industrial Average ($INDU). See chart below:


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