Aluminum producer Alcoa said last night that its first-quarter profit was cut in half from a year ago, as higher energy costs and a weak dollar offset a surge in the metal's price.
The results, the first by a Dow component in the quarterly earnings season, missed expectations by 5 cents a share. But Wall Street looked beyond the profit shortfall and currency issues to focus on the rising price of aluminum and the shares recovered after briefly declining in after-hours trading.
"It looks like a pretty solid quarter," said Bruce Zaro, chief technical strategist of Delta Global Advisors in Boston. "Everybody knows the dollar has been weakened and that's one of the most difficult things, especially for the commodity makers, to estimate how that's going to impact the numbers at the end of the quarter."
The price of aluminum on the London Metal Exchange below $2,500 per tonne at the beginning of the year, but has risen since February and gained $17 to $2,970 yesterday.
"I think the fundamentals for aluminum could be quite strong over the next couple of years," said Brian Hicks, co-manager at U.S. Global Investors' resources fund. "That's the way we're looking at it - we're not so focused on near- term quarterly results. I think the Street might allow for this mishap."
Net earnings were $303 million, or 37 cents per share, compared with $662 million, or 75 cents per share, in the same quarter last year, Alcoa said. Income from continuing operations, excluding restructuring and tax impacts, were $361 million, or 44 cents per share.
Revenue fell to $7.4 billion from $7.9 billion a year earlier, Alcoa said. Analyst expectations were for revenue of $7.388 billion.
Alcoa shares edged higher to $37.90 in after-hours trading after dropping more than 2 percent on the initial earnings report. The shares had fallen $1.56, or 4 percent, to close at $37.44 on the New York Stock Exchange.
The company said earnings were "compressed" by higher raw material and energy costs and by the impact of a weaker US dollar.