Alcoa's (AA) Q3 Earnings Trump on Strong Aluminum Pricing

Alcoa Inc. (AA) topped earnings estimates in the third quarter of 2014 on record results from its downstream business, aided by higher aluminum pricing and strong productivity. The company's legacy primary metals business also delivered strong results, helped by lower raw material costs and higher pricing.  

The U.S. aluminum kingpin, which was removed from the Dow Jones Industrial Average last year, is gaining from healthy demand for aluminum across aerospace and auto markets and its ongoing efforts to reposition its portfolio, including closure of high-cost smelters.

The New York-based company raked in a profit of $149 million or 12 cents per share in the third quarter compared with net income of $24 million or 2 cents per share in the year-ago quarter and an income of $138 million or 12 cents per share in the second quarter.

Alcoa recorded $221 million in restructuring charges and other special items in the quarter. Restructuring actions were mostly related to reduction of costs in the commodity business.

Excluding one-time special items, earnings came in at $370 million or 31 cents per share in the reported quarter, ahead of the year-ago earnings of $120 million or 11 cents per share. Earnings per share also surpassed the Zacks Consensus Estimate of 21 cents.

Revenues rose 8.2% to $6,239 million in the third quarter from $5,765 million in the year-ago quarter and also increased 7% from the previous quarter. It exceeded the Zacks Consensus Estimate of $5,781 million. The increase can be mainly attributed to organic growth, favorable pricing and higher energy sales.

Alcoa reaffirmed its global aluminum demand growth expectations of 7% for 2014. Its shares gained as much as 3% in extended trading yesterday on strong earnings beat. The stock is up 52% so far this year and 104% over a year, outperforming the corresponding gains for the S&P 500.

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