UPDATE 3-Alcoa earnings beat estimates after special items, shares rise

Tue Apr 8, 2014 6:43pm EDT

(Adds forecasts and context on automotive aluminum)

April 8 (Reuters) - Alcoa Inc reported a decline in first quarter adjusted profit on Tuesday as aluminum prices dropped. But earnings came in ahead of analysts' expectations, and the aluminum producer's shares rose in trading after the bell.

After-tax operating income rose in the company's "engineered products and solutions" segment, which sells cast metal products like auto parts, to $189 million from $173 million.

"The news was certainly better than the street anticipated. The top line was slightly below estimates, but the bottom line was significantly better," said Stephen Massocca, fund manager at Wedbush Morgan in San Francisco.

Stubbornly low prices have weighed on Alcoa and other aluminum producers, and it has been pushing to lower expenses by shutting down higher-cost smelting capacity.

Alcoa's downstream segment, which sells products like truck wheels and aircraft fuselages, has lately been more profitable than its upstream businesses of mining bauxite, refining into alumina and smelting alumina to produce aluminum.

The company, which is based in New York but has operations around the world, said recent expansion projects in Iowa and Tennessee should increase its revenue from automotive sheet six fold from 2013 to more than $1.3 billion in 2018.

Automakers' demand for aluminum is growing rapidly as they seek to improve fuel efficiency, developing vehicles like Ford Motor Co's aluminum-intensive next generation F-150 pickup truck, unveiled in January.

In the short term, engineered products and solutions is targeting after-tax earnings of $200 million or more in the second quarter, Chief Financial Officer William Oplinger said on a call with analysts and investors.

Alcoa said it now expects the global aerospace market to grow by between 8 and 9 percent in 2014, up from the 7 to 8 percent band it forecast in January, on the back of strong demand for both large commercial aircraft and regional jets and continued growth in the business jet market.

Alcoa has long been the first S&P 500 company to report results each quarter, and since aluminum is used by some key industries, including the automotive, aerospace and construction sectors, some see it as a bellwether for the earnings season.

But Alcoa's results often diverge from its customers, which has led some to question how much it says about the market as a whole.

In February Alcoa said it would close the Point Henry smelter and rolling mills in Australia. In March, the company said it would shut another 147,000 tonnes of smelting capacity in Brazil.

Net loss for the first quarter was $178 million, 16 cents a share, compared with net income of $149 million, or 13 cents, a year earlier.

Excluding $276 million in restructuring charges and other special items, earnings fell to $98 million, or 9 cents a share, from $121 million, or 11 cents. Sales fell to $5.45 billion from $5.83 billion.

Analysts had been expecting earnings of 5 cents a share on revenue of $5.55 billion, according to Thomson Reuters I/B/E/S.

Its shares rose 2.4 percent to $12.83 in aftermarket trading on Tuesday. (Reporting by Allison Martell and Cameron French in Toronto, and Nicole Mordant in Vancouver; Editing by Cynthia Osterman)

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