Alcoa Kicks off Earnings Season With Revenue, Earnings Beat

Joe Goldman  |

Alcoa (AA), the world’s largest aluminum producer, kicked off earnings season with a beat on both earnings and revenue, setting high standards for the remainder of the earnings season.

Alcoa reported a net loss of $119 million, or $0.11 per share, versus the $2 million loss, or break-even per share, from the same period a year ago. Revenue for the quarter was $5.85 billion, as compared to $5.96 billion from the previous year. Analysts were expecting a profit of $0.06 per share on revenues of $5.83 billion. Excluding one-time restructuring costs and legal fees, Alcoa posted a $0.07 per share profit, thus beating expectations.

The upside surprise came in spite of aluminum prices recently hitting three-year lows. Alcoa CEO Klaus Kleinfeld cited cost cutting and strength in automobiles, aerospace, trucks, and consumer electronics for the earnings beat.

Kleinfeld told CNBC that he is “excited” about Alcoa’s future prospects for a number of reasons. He raved about Alcoa’s strong balance sheet, which now boasts $1.2 billion cash on hand and recently paid down $566 million in debt this quarter.

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 Kleinfeld was also bullish on the Chinese economy, which he expects to continue to grow at 7.7-7.8 percent. “I’m not really concerned about China,” he said, as he thinks that government tightening could actually bode well for the materials industry in the long run.

Perhaps most important of all, Kleinfeld was especially enthusiastic about aluminum fundamentals. He expects seven percent demand growth this year, and continued growth in years to come. “I tend to believe we are seeing a low [in aluminum prices] at this point in time also.”

With so much positive commentary, one would expect that Alcoa’s is performing well for shareholders. However, in reality, Alcoa shares have been an absolute nightmare to own. Kleinfeld took over the CEO position in May 2008 when shares traded well above $40. Since its pre-recession highs, the stock is down over 80 percent under Kleinfeld’s leadership.

“Are you surprised that you have a job at this point?” CNBC’s Bill Griffeth asked Kleinfeld.

Of course, this question isn’t entirely fair. Kleinfeld took over the company a few months before one of the worst financial and economic crises in history and has been the victim of perpetually weak aluminum demand, stunningly low aluminum prices, and a weak global economy. At the same time, Alcoa must begin to deliver eventually or Kleinfeld could be ousted as the company’s CEO.

Alcoa shares initially reacted positively on the news, but eventually traded flat in after hours trading. Shares hit $7.90, only 3.6 percent shy of its $7.63 multi-year low.

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