By Nick Carey
(Reuters) - Metals company Alcoa Inc (N:AA) on Tuesday reported higher quarterly profit due to cost-cutting and lower tax provisions, but results missed expectations and its stock sank 10 percent.
The rise in earnings at Alcoa came despite lower revenue as it curtailed or closed some traditional smelting operations and confronted falling prices. Revenues fell in its business serving the automotive and aerospace industries, which Alcoa said was due partly to delayed aircraft deliveries and pricing pressure.
"We are performing well despite the low pricing environment ... demanding conditions on the commodity side as well as aero industry teething problems," Alcoa Chief Executive Officer Klaus Kleinfeld told Reuters. "What you see shining through is that we have concentrated on what we can influence and you see our strong resilience."
This is the company's last quarterly report before it splits into two entities ahead of the market opening on Nov. 1. The first company, keeping the name Alcoa, will focus on the traditional smelting business. The other, Arconic, will specialize in higher-end aluminum and titanium alloys for the automotive, aerospace and construction industries.
CFRA Research analyst Matthew Miller maintained a "buy" rating on the stock, saying in a note to clients that despite the aircraft delays "we think there will be accelerating demand in 2017."
"We are encouraged by strong productivity gains in both businesses (Alcoa and Arconic)," he said.
Alcoa said that global automotive production will rise between 1 percent and 4 percent in 2016 and that aircraft deliveries will be flat to up 3 percent in 2016.
Its quarterly results came as benchmark aluminum prices
But Kleinfeld said Chinese capacity growth "has not been substantial," adding Alcoa sees aluminum demand increasing 5 percent in 2016, outpacing supply growth of 3 percent.
He said the continued "aluminumization" of the auto industry is a positive, "although the overall market in the U.S. seems to be plateauing."
Earlier Tuesday the top executive at rolled-aluminum product maker Novelis Inc
New York-based Alcoa reported third-quarter net profit of $166 million, or 33 cents per share, up from $44 million, or 6 cents a year earlier. Excluding items, the company posted earnings per share of 32 cents. Analysts, on average, expected 35 cents.
In the most recent quarter, Alcoa reported "productivity gains" of $377 million across all segments.
Revenue fell to $5.2 billion from $5.6 billion a year earlier and was below estimates of $5.3 billion.
Alcoa shares tumbled $3.15 at $28.37 in mid-day trading.