Alcoa Inc. (NYSE: AA) has just kicked off earnings season, and it was probably more than just a timing coincidence that Alcoa’s shares were downgraded this morning ahead of the numbers. Amazingly, the initial report sounds better than we would have expected had we just paid attention to the downgrade.

It was Morgan Stanley that downgraded the aluminum giant to Equal Weight from Overweight. Investors often have used Alcoa as a bogey to try to predict earnings season because it was the first DJIA component to report each earnings season. Now that Alcoa finally has been booted out of the DJIA, it will be interesting to see who really cares.

Alcoa’s formal earnings came in at $0.02 in earnings per share (EPS) and $5.8 billion in revenue, although that figure includes a $96 million charge. The earnings outside of items was $0.11 EPS, or $120 million, which the company maintained is up 57% sequentially despite lower realized aluminum prices. Thomson Reuters had estimates of $0.06 EPS and $5.63 billion in revenue.

Alcoa reaffirms its 7% global aluminum demand growth forecast for 2013 and sees essentially balanced alumina and aluminum markets. The company’s growth projections are as follows (global growth this year):

• Aerospace (9% to 10%)
• Automotive (1% to 4%)
• Packaging (1% to 2%)
• Commercial building and construction (4% to 5%)
• Industrial gas turbine (3% to 5%) end markets
• In the heavy truck and trailer market, Alcoa is raising its 2013 growth expectations to a range of 5% to 9%, versus a prior 3% to 8%, based on improvements in the European market and a stronger Chinese market.

Some brief comments to show the direction of how comments were coming were as follows:

• Global Primary Products overcame falling metal prices and lower premiums to deliver significant performance improvement through productivity gains.
• Our commodity business delivered better performance in a tougher market environment, and we continued to reshape the portfolio to lower the cost base.
• Alcoa’s value-add businesses, comprising Engineered Products and Solutions and Global Rolled Products, accounted for 57 percent of total revenues and 79 percent of segment after-tax operating income.
• Alcoa now has 16 percent, or 651,000 metric tons, of smelting capacity offline.
• Alcoa’s debt-to-capital ratio stood at 34.5 percent, flat with second quarter 2013, and 160 basis points lower than third quarter 2012.
• Net debt-to-capital stood at 31.6 percent.
• Alcoa ended the quarter with cash on hand of $1.0 billion.

The drop in Alcoa on Tuesday ahead of earnings was actually less than the market, probably because this stock already has floundered, even while the stock market rallied. Shares closed down 0.4% at $7.94, against a 52-week trading range of $7.63 to $9.37. Shares are indicated up almost 3% at $8.12 in the after-hours session.

Until we have seen formal guidance, we would urge investors and traders to consider the Alcoa report only a partial snapshot.

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