Alcoa slashes it outlook for China’s production of cars, heavy duty trucks

Aluminum giant Alcoa will release its third quarter results after the market close on Thursday.

The planned Alcoa breakup marks the culmination of a strategy pursued by Chief Executive Officer Klaus Kleinfeld since taking charge of the 127-year-old company in 2008.

Earnings sank 77% to 7 cents per share, as revenue dropped 11% to $5.57 billion. This decrease was partially offset by a 10 percent third quarter revenue increase from organic growth in aerospace, automotive and alumina, combined with acquisitions.

Alcoa’s earnings report are closely watched by investors as it’s one of the first major companies to report quarterly results and unofficially kicks starts the earnings season.

“For us, when you look at the upstream side, our revenues are down, but a few of it is absolutely part of the transformation and it is a good thing”, he said. Analysts polled by Thomson Reuters expected earnings of $0.14 per share.

A year ago Alcoa earned $149 million, or 12 cents per share, on revenue of $6.24 billion.

While we were not surprised by the announcement of the split – we had discussed it many times in the past – the timing was curious from the perspective of the commodity business, in our view. We have intensified innovation and growth in the Value-Add businesses, and it shows through the solid underlying performance despite currency movements and market fluctuations.

Alcoa reaffirms its projections that global aluminum demand will rise by 6.5% in 2015 and double between 2010 and 2020, adding that global demand growth is tracking ahead of the projection so far this decade. Alcoa shares last traded at $10.88, with a volume of 26,433,370 shares traded. It slashed its forecasts for China, including lowering its estimate for 2015 automotive-production growth to 1% to 2% from 5% to 8%. Its products, including aluminum, titanium and nickel, are utilized in aircraft, cars, commercial transportation, packaging, building and construction, petroleum and gas, defense, consumer electronics, and industrial applications across the world.

Overall, the company has a fair record in surpassing the revenue estimates by Street analysts, as it managed to post a positive surprise in six out of the last eight reported quarters. The negative surprise from Alcoa sets the stage for a quarter investors expect could be the first decline in profit since the third quarter of 2009. Earlier this month, Alcoa announced an approximately $1.1 billion contract with Lockheed Martin that draws on new titanium capabilities gained through RTI.