Alcoa Inc, the largest U.S. aluminum producer, posted a big jump in second-quarter profit partly due to soaring prices for aluminum and its raw material alumina.
Net earnings were $322 million, or 28 cents per share, compared with $136 million, or 13 cents per share in the same quarter of 2010.
Revenue rose 27 percent to $6.6 billion, topping the $6.3 billion expected by analysts.
Following are initial reactions of analysts and investors:
CHARLES BRADFORD, BRADFORD RESEARCH, NEW YORK
Basically earnings doubled ... It was a good quarter. They didn't do as well in the aluminum business as I had expected because they had a 6 percent increase in prices but flat earnings.
The real issue is going to be looking ahead because the third-quarter aluminum price could be down 5 cents a pound, because that's what it is so far ... Seasonally, the third quarter is not a good quarter for them. The second quarter is much stronger.
I think (analysts) are going to have to take the third-quarter estimates down.
TIM GHRISKEY, CHIEF INVESTMENT OFFICER, SOLARIS ASSET MANAGEMENT, BEDFORD HILLS, NEW YORK
Sort of mixed, but somewhat what was expected. The beat on revenues -- certainly good news. The fact that expenses are up and therefore they missed on earnings was also expected.
Seeing some price pressures in some of the input costs at Alcoa and a number of companies and this could be a predecessor of what we see in a lot of earnings this quarter. Where revenues surprise to the upside and expenses also surprise to the upside, that might pressure some of the earnings reports.
Company management did cite energy and material costs. The energy costs should moderate a bit in the current quarter and material costs as well. Both of those have come down over the last several months.
STEPHEN MASSOCCA, MANAGING DIRECTOR, WEDBUSH MORGAN, SAN FRANCISCO
The initial reaction is that revenues are better than expected, but people are still going through the numbers. It's too early to draw any conclusions about the earnings.
The revenue beat is the news here, but it's one data point so it's not conclusive. The other thing is Alcoa's CEO is talking about a strong second half and an improving outlook. They've seen growth in various markets, aerospace, automotives.
The market is going to be more focused on macro concerns overnight. In a vacuum, this Alcoa news would be market moving, as the start to earnings season, but there are so many other issues that may drown it out tomorrow, based on what happens in Europe and negotiations in Washington.
BRIDGET FREAS, ANALYST AT MORNINGSTAR, CHICAGO
The big story here is the beat on the revenue line. $6.6 billion -- that was certainly ahead of our expectations. Even though they've had a little more cost than expected during the quarter, volumes have improved significantly.
NICK KALIVAS, VICE PRESIDENT OF FINANCIAL RESEARCH, MF GLOBAL, CHICAGO
I think from an index perspective, they should be neutral and positive. They are affirming their outlook for aluminum demand. This provides an offset of a profit warning from Microchip. The market has gone so far in pricing in the problems in the euro zone.
We might get a relief rally if we just see company results coming in at expectations.
Still, the market has one eye on Europe. We want to specifically know with what's happening with Greece, with news stories saying there could some kind of default. We need an overall stability in the financial sector.
(Reporting by Matt Daily, Ernest Scheyder, Ashley Lau, Chuck Mikolajczak and Richard Leong)