Alcoa Inc., the world’s largest aluminum producer, announced sharply increased profits Wednesday but the earnings fell short of some Wall Street expectations.
The Pittsburgh-based company, the first Dow component to report second-quarter earnings, said net income was $404 million, or 46 cents per share, compared with $216 million, or 26 cents, a year ago.
Revenue climbed 11 percent to $6.1 billion over the same quarter of 2003 on strong sales of alumina -- the raw material for aluminum -- and chemicals. Consumption of aluminum, used in everything from cars to construction to cans, has increased while inventories have declined, sending prices higher.
However, the consensus of analysts polled by Reuters Estimates had expected Alcoa to earn 48 cents per share in this quarter, with a range of 44 cents to 52 cents. In after-hours trading Wednesday, Alcoa stock fell to $31.65 from its close of $32.77 on the New York Stock Exchange.
Analyst Lloyd O’Carroll of BB&T Capital Markets said the stock probably dropped after-hours because there had been a ”whisper number” -- or rumor -- on Wall Street that Alcoa would earn 51 cents. Some investors expected earnings to be near the top of the range.
“People bought the stock on the whisper number and were disappointed,” he said.
O’Carroll said that although the actual number of 46 cents was below his estimate of 49 cents, “the net consensus is that there were some one-time issues.” If restructuring and environmental charges of approximately $5 million were put back, he said, it would bring the number up to 47 cents per share, well within the expected range.
Victor Lazarovici, an analyst with BMO Nesbitt Burns, said that by his more conservative standard, Alcoa beat his estimate of 44 cents diluted. “I am not unhappy with the results, the Street may have been a little too optimistic.”
He characterized Alcoa’s results as “Solid, good.
“The revenues were higher than expected and results in the alumina/chemical sector exceeded our expectations.”
Lazarovici said while he was a little disappointed with volumes being lighter, that was compensated for by revenues. ”Clearly, prices were stronger than we were looking for.”
Alcoa Chairman and Chief Executive Officer Alain Belda said in a statement: “We see continued favorable fundamentals in upstream businesses and significant potential in downstream aerospace, industrial products, and commercial vehicle markets that are moving off lows in the cycle.
The London Metal Exchange’s benchmark aluminum contract for three-months delivery peaked in April at $1,845 per tonne, a high dating back to 1995, but still up significantly from the year-ago low at $1,322.
In its earnings release, the company said it had substantially completed its divestiture program. Earlier Wednesday, Alcoa announced it was combining its European building business with its Kawneer North American operations to create a global building and construction systems business. Kawneer had been slated for sale previously.
It also said it was pursuing low-cost opportunities around the world to expand and improve its position in aluminum smelting. Alcoa will break ground on its new smelter in Iceland later this week, it said.
