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The share price of industrial giant Alcoa (NYSE:AA) was up 2.0% yesterday in after-hours trading following the late afternoon release of its Q4 2014 results. Sentiment continued to be strong in pre-trading hours this morning, as it gained another 1.3%. Following a high of 16.53 shortly after 9:30 a.m. EST, the share price has receded to 15.99, down 0.18% as other market pressures have come into play.
Exceeding Expectations
Analyst expectations were that Alcoa would bring in revenues of $6.02 billion for the quarter. Alcoa surprised with $6.377 billion.
The consensus was that, excluding one-off charges, the company would have a net income of $0.27 cents per share. Alcoa surprised again with $0.33 per share.
Exceeding 2013
Revenue for the fourth quarter was up by 14% from $5.58 billion in 2013 to $6.38 billion.
Revenue for the full year grew by 4% to $23.9 billion, up from $23.0 billion in 2013.
Pretax profit for the quarter grew to $234 million compared to a loss of $2.3 million year-on-year.
Pre-tax profit for the year was $497 million compared to a loss of $2.2 billion last year.
Excellence in Transformation
Alcoa’s operating results were the best the company has generated since 2008. CEO Klaus Kleinfeld explained that, “Our strong fourth quarter capped a pivotal year as we significantly accelerated Alcoa’s transformation.” Like any other business that expects to stand the test of time, Alcoa has had to re-conceive itself to remain a leader. Once positioned and popularly known as the world’s leading supplier of aluminum products, the transformation that Kleinfeld cited has evolved the company into “A global leader in lightweight metals technology, engineering and manufacturing,” with technologies that “enhance transportation, from automotive and commercial transport to air and space travel, and improve industrial and consumer electronics products.” It’s products now “enable smart buildings, sustainable food and beverage packaging, high-performance defense vehicles across air, land and sea, deeper oil and gas drilling and more efficient power generation.”
Klienfeld shared that “As we built out our value-add businesses, we gained profitable share across exciting downstream growth markets and captured aerospace and automotive growth in the midstream.”
Excellence in Market Performance
The S&P has gained 10.72% in the past 12 months. The Dow Jones Industrial Average has gained 8.21%. Alcoa’s share price has gained in excess of 50%. Those indexes are meant for comparison and, by comparison, Alcoa has proven to be excellent. All sorts of people are writing today about how lower aluminum prices have helped Alcoa’s performance. I can accept that. Klienfeld accepts that. But it is not an underlying reason for the company’s performance as much as it is a good card in the hand that Alcoa has been dealt and played so well.
A Final Note
In 1889 Alcoa developed the first aluminum tea kettle. It’s time to forgive them. Porcelain and clay pots are still available to make a proper cup of tea.
