Shares of aluminum titan Alcoa (AA - Free Alcoa Stock Report) traded lower after it reported first-quarter sales of $5.96 billion. Although that result was 22% higher than that posted in the year-earlier period, it appeared to fall short of elevated consensus expectations. Earnings per share were $0.27, a nickel above our estimate, and a considerable improvement from the year-earlier loss of $0.19 a share, thanks to productivity enhancements and higher realized prices for alumina and aluminum. These positives were partially offset by a weaker U.S. dollar and a rise in the cost of energy and materials.

The initial sharp drop in the share price following the news release put pressure on the stock market, in general, and suggests that investors are concerned about a possible slowing of the top line. This is not wholly unjustified. We are more sanguine, however, and believe that generally favorable trends will continue during the remaining nine months. This ought to, in turn, enable share net to climb to $1.00 for 2011. That would mark a decided turnaround from the depressed $0.25 a share Alcoa posted the year before. Assuming further expansion of operating margins, the bottom line stands to climb to $1.35 a share in 2012.

As is typically the case in an expanding economy, management has been restarting some operations. Indeed, it is firing up idled potlines at three aluminum smelters in the United States, namely Massena East, Wenatchee Works, and Intalco. These moves, expected to be completed during the first half of 2011, ought to boost aluminum production by 137,000 metric tons over the course of this year, and by 200,000 metric tons on an annual basis in 2012 and beyond. Consequently, Alcoa would have 674,000 metric tons of idle capacity remaining.

About The Company:  Alcoa Inc., a Pennsylvania corporation, is a global leader in the production and management of primary aluminum, fabricated aluminum, and alumina combined.  It supplies the aerospace, automotive, building and construction, commercial transportation, and industrial markets.  It has more than 300 operating and sales locations in over 35 countries.  Sales of aluminum and alumina account for more than three-fourths of Alcoa’s total revenues.  It also produces nonaluminum products, such as precision castings and fasteners for the aerospace and industrial markets.  Alcoa’s operations consist of four worldwide reportable segments: Alumina, Primary Metals, Flat-Rolled Products, and Engineered Products and Solutions.

At the time of this article's writing, the author did not have positions in any of the companies mentioned.