And they're off! In what has become a regular earnings-season feature, Alcoa
With aluminum prices and the U.S. dollar both sliding, the company chalked up net income of $61 million, or $0.06 a share, versus $77 million, or $0.08 per share, for the comparable quarter a year ago. But if you back out the $35 million, or $0.03 a share, in negative special items, its per-share profit climbed to $0.09, compared with the $0.05 the analysts had been estimating. Not bad, if you ask me.
Regarding the strength of the broader aluminum sector, however, I'm looking forward to the pre-Halloween releases from the rest of the industry, including Aluminum Corporation of China
It's important to point out that Alcoa has now increased its global 2010 aluminum growth forecast to 13%, up from its previous 12%. The company attributes its greater optimism in large part to expanding middle classes -- and, consequently, higher demand for aluminum -- in the BRIC countries (Brazil, Russia, India, and China).
In its third quarter, however, three of Alcoa's four segments turned in sequentially lower after-tax operating income (ATOI). The culprits were generally lower realized aluminum prices and dollar declines, along with a fire at its Tennessee hot mill and reduced production in Europe. Only the Engineered Products and Solutions segment managed to grow its ATOI from the second quarter.
Nevertheless, CEO Klaus Kleinfeld said on his post-release call that management is "mutedly optimistic." He also noted the presence of an improving order flow and higher deliveries -- up 3% year to date -- along with optimism that international air traffic will boost the aerospace division. However, he sees aluminum demand from commercial building and construction dropping by as much as 25%, as he declares that the already impaired sector has "not yet bottomed out."
Even with my own cautious feelings about the rapid growth of smelting capacity in China, Alcoa's massive size should at least partially insulate it from problems that arise as a result. Less vertically integrated companies, such as Century Aluminum
Fool contributor David Lee Smith doesn't own shares in any of the companies named above. Want to improve your flow of solid investment ideas? Try any of our Foolish newsletter services free for 30 days.
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