Alcoa, a leading producer of aluminum, had beaten analysts’ expectations on Tuesday. After a fourth quarter loss the company has rebounded in the first quarter, showing marked increases in the aerospace and automobile sectors.
The earnings for Alcoa’s first quarter raised the company’s stock by 6 percent, finishing at $9.80 for the day on the NYSE.
“We pretty much see growth in all global end markets,” said CEO Klaus Kleinfeld. “On aerospace, the market goes from strength to strength.”
He also said that most other sectors are performing strongly, aside from construction. He went on to say that there is still growth in China; however, a bit softer than before. Lastly, he said that European markets are remaining steady.
Future predictions regarding Alcoa
Alcoa makes aluminum for aircraft, cars, and beverage cans. The company raised its global growth forecast for the aerospace market by 3 percent to 13-14 percent. Alcoa also projected that aluminum for the auto industry will grow by 3-7 percent. In addition to these growth forecasts, Alcoa went on to reaffirm its prediction that there will be a global aluminum deficit in 2012. This is expected to cause a 7 percent growth in global demand in addition to the 10 percent growth experienced in 2011.
Factors affecting first quarter growth
Alcoa stated that income from continuing operations in the first quarter was $94 million, 9 cents per share, in comparison to a profit of $309 million, 27 cents per share in the first quarter of 2011. Excluding items, income was 10 cents per share.
Alcoa stated that revenue had risen slightly to $6 billion. Analysts were expecting revenue to be around $5.77 billion and a loss of 4 cents per share. For Alcoa, this is the first time it has beaten earnings estimates for many quarters.
Alcoa said that improvements during the fourth quarter were due to increases in the price 0f aluminum and volume, and also a strong increase in productivity across all business sectors.
The encouraging news from Alcoa is the first of many key earnings reports that will be coming from the materials sector. The earnings report from Alcoa is seen as a signal for the rest of the materials industry. Similar earnings reports are expected from the rest of the sector.
Aluminum prices have been down almost 20 percent compared to a year ago, but the price has been slowly rebounding. Aluminum prices were at $2126 per metric ton compared to $2020 on January 1st.
Alcoa’s stock has fallen 46 percent from April 11 – this is mostly due to the drop in aluminum prices; however, a strong rebound may be seen in the near future.