Alcoa Inc. (AA), the largest U.S. aluminum producer, reported first-quarter earnings that exceeded analysts’ estimates as demand from airplane and car manufacturers increased.
Net income rose to $149 million, or 13 cents a share, from $94 million, or 9 cents, a year earlier, the New York-based company said yesterday in a statement. Earnings excluding an income-tax benefit and other one-time items were 11 cents a share, beating the 8-cent average of 18 estimates compiled by Bloomberg.
Alcoa, traditionally the first company in the Dow Jones Industrial Average to report earnings, has been shifting its focus from the production of the lightweight metal to making valued-added aluminum parts for industry. Profit in the engineered products and solutions unit, which supplies the aerospace and automotive industries, rose 10 percent, Alcoa said in the statement.
“There was clear improvement in engineered products,” Lloyd O’Carroll, an analyst at Davenport & Co. in Richmond, Virginia, said yesterday by phone. “The aerospace market is strong.”
Alcoa rose 0.5 percent to $8.43 at 9:43 a.m. in New York. The shares have declined 3.4 percent this year.
Airbus SAS and Boeing Co. (BA:US) are working to meet aircraft orders as U.S. airlines replace the world’s oldest fleets. Airbus yesterday broke ground on a new plant in Mobile, Alabama, which will build the A320neo single-aisle jet.
U.S. light-vehicle sales in March climbed 3.4 percent to 1.45 million, the best month for the industry since August 2007, according to researcher Autodata Corp. Automakers sold 3.69 million cars and light trucks in the U.S. this year through March, the most in any quarter since the last three months of 2007.
The auto industry is on track to consume 4 percent more aluminum this year as the average North American car adds 14 pounds of the metal in 2013 compared with last year, according to research by O’Carroll.
Alcoa’s revenue fell 2.9 percent to $5.83 billion, missing the $5.88 billion average of 11 estimates. The company cited lower metal prices and the impact of smelter curtailments in Spain and Italy for the decline in sales.
Aluminum for immediate delivery on the London Metal Exchange fell 9.2 percent this year to close at $1,853 a metric ton yesterday. The average LME price fell 8.2 percent from a year earlier to $2,002 a metric ton in the quarter.
“The aluminum price is basically the issue,” David Gagliano, a New York-based analyst at Barclays Plc, said yesterday in a telephone interview. “Downstream was really strong, but it’s being offset by the low metal prices recently.”
Alcoa reiterated its forecast that global aluminum demand will increase 7 percent this year.
The company estimates surplus production will fall to 155,000 tons in 2013 from an earlier projection of 535,000 tons as Chinese smelters cut output, Chief Financial Officer William Oplinger said yesterday on a conference call to discuss results.
Alcoa is seen to be losing its accuracy as a bellwether for the U.S. stock market.
The Standard & Poor’s 500 Index has usually followed Alcoa (AA)’s lead since 2002, rising 2.5 percent in quarters when the aluminum producer beat the market after earnings, less when it didn’t. That relationship has broken down since 2011, when the S&P 500 posted even bigger gains, about 3 percent, when Alcoa’s results hurt its stock, according to data compiled by Bloomberg.
Overtaken in size and market clout by diversified commodities companies such as BHP Billiton Ltd. (BHP) and Glencore International Plc (GLEN), Alcoa has struggled to make a profit with aluminum prices sagging as production outpaces the metal’s use. Investors are looking beyond the producer to companies such as International Business Machines Corp., according to Bespoke Investment Group.
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