Alcoa (AA) Slides 11%: Here's What You Need to Know
Shares of Alcoa Inc (AA) fell on Tuesday against the backdrop of a lower day in stocks overall. Alcoa's stock was down 11.4%, shedding $3.60 per share to close at $28.
On Tuesday, the company disclosed its results for third quarter operations, and both revenue and earnings came in lower than analysts had expected.
Here's what you need to knowFounded in 1888, Alcoa provides lightweight metals for engineering and manufacturing.
It operates through the following segments: Alumina, Primary Metals, Global Rolled Products and Engineered Products and Solutions, and Transportation and Construction Solutions. Alcoa employs 57,000 people in 30 countries around the world.
Before Tuesday's market open, Alcoa announced its financial results for the 2016 third quarter. Revenue came in at $5.2 billion, which was about 6% lower than the $5.6 billion reported for the same quarter a year earlier.
Earnings were $166 million, or $0.33 per diluted share, considerably higher than the $44 million and $0.06 per diluted share reported for the third quarter of 2015. However, analysts had been expecting earnings per diluted share of $0.36. That resulted in a sell-off of the company's stock, one of the worst declines in recent years.
But, Alcoa is currently going through a transition that may set some of its segments up for future success.
The company will soon split into two separate entities—Alcoa Corporation and Arconic—effective on November 1. The company's alumina and aluminum production business will be spun-off as Alcoa Corporation, while Arconic will include the engineered products segment.
The alumina/aluminum segment experienced a 15% decline in after-tax operating income this quarter, coming in at $128 million. The weakness was attributed to soft alumina price levels.
Meanwhile, the engineered products segment produced a 4% increase to $267 million in after-tax operating income, even as it experienced a 1% drop in revenue, which was reported at $3.4 billion for the quarter. The decline is attributed to a combination of slow product deliveries in the aerospace industry and weaker demand in the commercial transportation industry in North America.
"Alcoa steered steady and showed resilience in spite of near-term market challenges. 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. Arconics 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.” - Alcoa Chairman and Chief Executive Officer, Klaus Kleinfeld.
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