Alcoa Inc (AA) Beats Earnings Estimates

Alcoa Inc (AA) Beats Earnings Estimates
By Alcoa ( [Public domain], <a href="">via Wikimedia Commons</a>

Alcoa Inc (NYSE:AA) kicked off third quarter earnings season strong, posting adjusted earnings of 31 cents per share on revenue of $6.2 billion, an 8% increase year over year and 7% sequential increase. Analysts had been expecting adjusted earnings of 22 cents per share on $5.842 billion in revenue.

GAAP earnings per share were 12 cents, compared to 2 cents a year ago. GAAP results include $202 million in costs related to restructuring, with 60% of those costs being non-cash.

Breaking down Alcoa’s earnings

Management reported that almost half of this year’s revenue growth was due to organic growth. They also said that better prices for metal and also higher energy sales helped to boost third quarter revenue.

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In Engineered Products and Solutions, Alcoa recorded the highest-ever after-tax operating income, which was $209 million. The segment also saw a new record adjusted EBITDA margin of 23.5%, according to tonight’s earnings release. Alcoa reported a 30% sequential increase and 45% year over year in after-tax operating income for its Global Rolled Products, which was $103 million.

Alcoa recorded an adjusted EBITDA per metric ton of $612 in its Primary Metals segment. That’s the highest since the second quarter of 2008.

Alcoa provides guidance

The aluminum maker said it expects to see its global automotive business grow by between 2% and 4%. Management still projects global aerospace sales to rise by between 8% and 9% this year. Alcoa also reaffirmed its previous guidance for a 7% increase in global aluminum demand for this year.

The company expects to close the Firth Rixson acquisition by the end of this year. Management said they have financing in place and U.S. regulators have approved it. They also signed multi-year contracts worth over $2 billion in total with The Boeing Company (NYSE:BA) and Pratt & Whitney.

In addition, Alcoa Inc (NYSE:AA) opened up the world’s biggest aluminum-lithium aerospace plant during the quarter and has already contracted $100 million in 2017 revenues for that segment.

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