Alcoa's third-quarter profit expected to fall

Associated Press

NEW YORK (AP) — Aluminum manufacturer Alcoa Inc. will open what's expected to be a disappointing earnings season when it reports third-quarter results Tuesday after the markets close.

WHAT TO WATCH FOR: Alcoa produces aluminum for a wide range of businesses, from automobiles to appliance makers and energy companies. It is the first company in the Dow Jones industrial average to report earnings so investors often watch its results for signs of how earnings may unfold for other companies

The slower global economy is expected to weigh on quarterly results for U.S. companies across a broad range of sectors. Analysts predict a decline of 1.3 percent in third-quarter earnings from a year ago for companies in the Standard & Poor's 500, according to S&P Capital IQ.

The economies of the U.S. and China are slowing. Europe's debt crisis has forced some countries into recession. Alcoa faces challenges from a slowdown in manufacturing in all three regions. Demand has been mixed and prices have been weaker while supplies are plentiful.

Alcoa's sales to automobile manufacturers and aerospace companies likely remained solid but construction markets are still weak, analysts said.

In addition, spot aluminum prices averaged about $1,900 per metric ton during the quarter, Morningstar Inc. analyst Bridget Freas said. Alcoa's realized price was $2,689 per metric ton in the year-ago quarter.

Shares of Alcoa rose 1.3 percent in the third quarter, ending at $8.86 per share on Sept. 28.

WHY IT MATTERS: Alcoa's performance provides a picture of economic growth because aluminum is used to make so many products for businesses and consumers. About three-fourths of its sales are in the U.S. and Europe.

WHAT'S EXPECTED: Analysts surveyed by FactSet predict earnings of 1 cent per share on revenue of $5.6 billion.

Argus Research analyst Bill Selesky expects Alcoa to lower its 2012 forecast for growth in global aluminum demand to 6 percent from 7 percent. "It's highly dependent on economic growth and until that starts to pick up, you know, we're probably in a steady state right now for Alcoa," he said.

LAST YEAR'S QUARTER: Alcoa's 2011 third-quarter net income totaled $172 million, or 15 cents a share. Revenue totaled $6.42 billion.