The market is so fickle.

Yesterday marked the unofficial kickoff to this year's third-quarter earnings season with the announcement that Alcoa (AA) had eked out an adjusted operating profit for the three months ended Sept. 30. While the news was initially well-received, sending shares of the aluminum giant temporarily higher in after-hours trading, the sentiment today has clearly changed. Two hours into the trading session, Alcoa's stock is down a whopping 3.4%.

Alcoa's earnings matter for one simple reason: As the first component of the Dow Jones Industrial Average (^DJI -0.98%) to report each quarter, it often sets the tone for the rest of the earnings season. According to CNBC's Pradip Sigdyal, when the aluminum giant beats estimates by more than 1%, the Dow always ends the quarter higher. Alternatively, when it misses estimates by at least 1%, the Dow finishes the quarter lower roughly half of the time.

Understanding Alcoa's earnings
At first blush, Alcoa's earnings are nothing to write home about. For the quarter, the company reported a loss from continuing operations of $143 million, or $0.13 per share. This was notably well-below both last year's results, in which the company recorded net income of $0.15 per share, and the consensus estimate, which had predicted that the company would break even.

Digging deeper into the numbers, however, reveals a more nuanced story. Most significantly, Alcoa recorded a number of large one-time charges. Among other things, it settled a lawsuit with a Bahrain company for $85 million related to bribery charges and came to an agreement with the Environmental Protection Agency involving environmental remediation of the Grasse River in New York state.

Without these charges, which collectively reduced Alcoa's bottom line by $175 million (roughly $0.15 per share), the company would have made $0.03 per share. This is the reason Alcoa's earnings release proclaimed "Income of $0.03 Per Share Excluding Special Items."

On the revenue side, alternatively, Alcoa's results reveal conflicting operational trends. Its upstream operations, consisting of the procurement and production of aluminum, continues to struggle against lower aluminum prices. As a result, the company has focused on increasing productivity and cutting costs, noting that "$98 million of combined sequential operational improvements across the Alumina and Primary Metals segments as higher volume, improved price and mix, and productivity gains more than offset cost headwinds."

Alcoa's downstream operations, meanwhile, which consist of more specifically tailored products for the aerospace and automobile industries, are setting records. Its rolled-products division, for example, recorded adjusted EBITDA per metric ton that was 72% higher than the 10-year average. And its engineered products division notched an adjusted EBITDA margin of 20% -- a third consecutive quarterly record.

The big question now is whether or not Alcoa's downstream success will continue. On the one hand, there's reason to be optimistic -- and the same thing goes for shareholders of companies like Boeing (BA 1.51%), Ford (F 0.69%), and General Motors (GM 1.20%) -- as the aluminum company is seeing 13% to 14% year-over-year growth in the aerospace market, and it raised its 2012 projections for the North American automotive market by 1%.

On the other hand, however, there remain significant industrial headwinds. For the aluminum industry overall, for example, Alcoa moderated its 2012 demand forecast to 6%, down from 7% previously. In addition, in the heavy-truck and trailer market, the company is anticipating a 9% decline, 2% worse than its initial estimate of a 7% decline.

Foolish bottom line
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