PITTSBURGH - Alcoa Inc.'s earnings soared 86 percent as demand from makers of aircraft, trucks and trains outweighed lower metal prices and a seasonal lull, the aluminum maker said Tuesday. But the results fell far short of Wall Street expectations.
The New York-based company reported third-quarter earnings of $537 million, or 61 cents per share, up from $289 million, or 33 cents per share, during the same period a year ago. Revenue jumped 19 percent to $7.63 billion from $6.40 billion.
But sales slipped 2 percent compared with the second quarter, mostly due to weaker metal prices and an expected slump during the quarter, when many European markets are closed and the automotive industry slows down.
"We had a very solid quarter - not to the level of the last quarter as I predicted three months ago, given metal price reduction and seasonality," Alain Belda, Alcoa's chairman and chief executive, told analysts and reporters during a conference call.
The lower quarter-to-quarter results were caused mostly by the lower metal prices and to a lesser extent variable prices for materials and seasonal changes, he said. Alcoa also suffered from mill outages in its flat-rolled product segment, Belda said.
"We experienced a couple of unplanned mill outages and some planned outages that extended longer than planned," he said. "We currently have all affected equipment operating."
With the exception of the U.S. automotive industry, he said, revenue in all of the company's markets was up compared with the third quarter of 2005, and that the company would continued to be managed for long-term growth.
The aerospace and commercial transportation markets continued to be particularly strong in the third quarter, despite the softening of the North American automotive and housing construction markets, Belda said earlier in a statement.
The quarterly results are the third-best in the company's history, even though metal prices on the London Metal Exchange dipped six percent during the quarter, according to Belda.
But analysts were disappointed with the results.
Analysts surveyed by Thomson Financial had forecast third-quarter profit of 79 cents per share, on average, and sales of $7.68 billion. A year ago, the company earned 33 cents per share.
BMO Capital Markets analyst Victor Lazarovici, who covers base metals and mining for the brokerage, described the results as "pretty awful" because they missed analyst figures by such a wide margin.
"Either they're not doing well operationally or they're not doing well communicating to the Street," he said, referring to Wall Street. "Or the Street is totally incompetent."
"You can cobble together the explanation, 'a penny here, a penny there,' but the big number is the revenue is much weaker than one would have expected for the price decline we actually saw," Lazarovici said.
He said it was almost impossible to determine metal prices used by the company during the quarter because of a time lag pricing system it uses for products and prices that were spiking and collapsing during the quarter.
Morgan Stanley analyst Mark Liinamaa said "we missed by enough that we're still working our way through the mechanisms of what the differences really were."
Alcoa shares, a component of the Dow Jones Industrial Average, closed Tuesday at $28.29 on the New York Stock Exchange, up 30 cents, or 1.1 percent. In extended trading, after the release of the results, the shares were down $1.69, or 6 percent, from the close.
Alcoa has more than 123,000 employees in 43 countries.
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