Alcoa's Quarterly Profit Rises, Beats Estimates
Aluminum producer Alcoa said on Wednesday that fourth-quarter net profit rose 76 percent on restructuring and tax benefits, offsetting lower aluminum prices.
The first earnings report from a Dow Jones Industrial Average member this quarter was above Wall Street expectations. The strong results, coupled with a bullish forecast from chemical maker DuPont earlier in the day, bodes well for the raw materials group heading into 2008, analysts said.
"It's kind of an early indication of the earnings trend, but more importantly, it might be a sign if the DuPont numbers hold true ... those are the sectors that have been actually the strongest," said Bruce Zaro, chief technical adviser at Delta Global Advisors.
Alcoa said net income increased to $632 million, or 75 cents per share, from $359 million, or 41 cents per share, in the year-ago period. The company recorded a benefit of 38 cents per share in the most recent quarter related to its agreement to sell its packaging and consumer business.
Before items, the company earned 36 cents per share. On that basis, analysts, on average, expected 34 cents, according to Reuters Estimates.
"The quarter looks good to me," said Mark Liinamaa, a mining analyst at Morgan Stanley, noting strength across all Alcoa's businesses except for flat-rolled products. "The market seemed positioned for a little bit of a disappointment. I don't see that today."
Alcoa said revenue dropped to $7.39 billion from $7.84 billion due to lower metal prices and the loss of revenue from its soft alloy extrusion business, which is now part of a joint venture.
Alcoa said operating income for its alumina business declined partly due to higher freight and energy costs and unfavorable currency rates.
"We battled substantially higher material input and energy costs and currency impacts, while simultaneously continuing to execute on the largest capital investment program in our history," said Chairman and Chief Executive Alain Belda.
On Monday, Credit Suisse lowered its profit outlook for the company, citing lower aluminum prices, adverse currency and energy price changes and more pronounced weakness in certain downstream markets.
Since trading at $2,659 per ton on the London Metal Exchange last Nov. 7, the price of aluminum has slipped and is currently selling for around $2,500 per ton.
Shares of Alcoa rose 2.4 percent to $31.99 in after-hours trading after the results were announced.