Alcoa’s Earnings Report Caught Investors Off Guard

Alcoa's Earnings Report Caught Investors Off Guard

Shares of Alcoa (NYSE: AA) plunged more than 10 percent on Tuesday after the company surprised the Street by reporting its third quarter earnings report ahead of the market open, rather than after the close as it typically does.

Alcoa said that it earned $0.33 per share in the third quarter on revenue of $5.2 billion.  Wall Street analysts were expecting the company to earn $0.35 per share on revenue of $5.32 billion.  Net income for the quarter rose to $166 million from $44 million in the same quarter a year ago.

Revenue for the quarter did come in 6 percent lower than last year and the company attributed the decline to the impact of curtailed and closed operations, lower alumina pricing and other pricing pressures.

As a reminder, Tuesday’s earnings announcement represents the last time it will report earnings as a full company as the company already announced it will split itself into two entities.

Must Read: Alcoa Confirms It Will Separate Itself Here Is What You Need to Know

Even though Alcoa’s business split hasn’t occurred yet the company did provide a breakdown of its performance by unit.

Alcoa’s legacy business saw its revenue remain flat on a year-over-year basis at $2.3 billion.  The segment’s after tax operating income fell 15 percent sequentially to $128 million as improved metal pricing was more than offset by lower alumina pricing and negative foreign exchange impacts.

The segment also achieved $190 million i productivity savings which brings its total year-to-date savings to $569 million which is already higher than its initial target of $550 million for the full year.

Arconic, the business unit which will focus on the high-performance materials and engineered products, reported a one percent dip in its revenue which totaled $3.4 billion.  The unit attributed its lower revenue to adjustments to delivery schedules within the aerospace industry, softness in the North American commercial transportation and pricing pressures.

The segment’s after tax operating income rose 4 percent year-over-year to $267 million, partially due to $187 million in recorded productivity savings in the quarter.  The segment noted it has achieved $547 million in year-to-date savings and is on track to achieve its 2016 target of $650 million.

”Alcoa steered steady and showed resilience in spite of near-term market challenges,” said Klaus Kleinfeld, Alcoa Chairman and Chief Executive Officer. “Profits grew in the combined Arconic segments, and Alcoa Corporation segments managed successfully to stay profitable in a low pricing environment. Productivity across the portfolio was exceptional, and paired with non-essential asset sales, further strengthened our cash position. Arconic’s results underline its strong position in higher margin markets where innovation, technology, process skills and cost focus pay off even under demanding circumstances, whereas Alcoa Corporation proved to be successful in spite of challenging market conditions. The strength of both future companies is the result of our multi-year strategy and allows us to launch two strong, independent entities.”