Alcoa (NYSE: AA) reported Q3 EPS of $0.31, $0.09 better than the analyst estimate of $0.22. Revenue for the quarter came in at $6.2 billion versus the consensus estimate of $5.77 billion.

• Engineered Products and Solutions delivers highest after-tax operating income in history of $209 million, 18th consecutive quarter of year-over-year after-tax operating income improvement; new record adjusted EBITDA margin of 23.5 percent
• Global Rolled Products after-tax operating income up 30 percent sequentially, 45 percent higher year-over-year
• Upstream business improves performance for 12th consecutive quarter; highest Primary Metals segment adjusted EBITDA per metric ton since second quarter 2008
• $306 million year-over-year productivity gains; year-to-date productivity gains of $862 million, exceeding annual target
• $249 million cash from operations; $34 million negative free cash flow
• Global aluminum demand growth forecast of 7 percent in 2014 reaffirmed

Continued Growth Across End Markets

Alcoa continues to project 2014 global aerospace sales growth of 8 to 9 percent driven by robust demand for both large commercial aircraft and regional jets. The Company tightened its projection for 2014 global automotive production growth from a previous range of 1 to 4 percent in the second quarter to 2 to 4 percent. Global packaging sales growth of 2 to 3 percent and global building and construction sales growth of 4 to 6 percent in 2014 remain unchanged. In the industrial gas turbine market, the Company’s projected decline of 8 to 12 percent, on lower orders for new gas turbines and spare parts, also remains unchanged for the year.

For the second time this year, Alcoa increased its 2014 estimate of production growth for the North America commercial transportation market to a range of 16 to 20 percent from a previous range of 10 to 14 percent in the second quarter, and 5 to 9 percent in the first quarter. The higher estimate is based in part on a 43 percent increase in third quarter truck orders year-over-year and strong backlogs. Globally, Alcoa continues to expect a flat commercial transportation market of negative 1 to positive 3 percent in 2014 due to ongoing weakness in the European market.

Additionally, Alcoa reaffirmed its 7 percent global aluminum demand growth projection for 2014. The Company sees a global aluminum deficit of 671,000 metric tons in 2014 and a further tightening of the alumina market, with a surplus declining to 389,000 metric tons from 824,000 metric tons in second quarter 2014.

Value-Add Portfolio Transformation

Alcoa’s strategy to build out its innovative, multi-material value-add businesses to capture profitable growth continues to make progress.

In second quarter 2014, the Company announced it would acquire global jet engine component leader Firth Rixson. The acquisition is moving toward completion and is expected to close by year-end. Financing for the acquisition is complete, U.S. regulatory approval has been granted and other approvals are on track.

Firth Rixson’s revenues are expected to grow 60 percent over the next three years, from $1 billion in 2013 to $1.6 billion, and to contribute $350 million EBITDA in 2016. When the acquisition is completed, it is also expected to grow Alcoa’s annual aerospace revenues by 20 percent, from $4 billion in 2013 to $4.8 billion on a pro forma basis. Firth Rixson is expected to increase the contribution of the aerospace segment to Alcoa’s value-add revenues from 30 percent to nearly 35 percent.

Positioning itself to better meet the aerospace industry’s growing demand for lighter, next generation materials, Alcoa opened the world’s largest Al-Li plant in Lafayette, Indiana this month. The plant has already contracted $100 million in Al-Li revenues for 2017. This is the Company’s third Al-Li expansion, with the first two at the Alcoa Technical Center outside Pittsburgh and at the Kitts Green facility in the United Kingdom.

Underpinning Alcoa’s aerospace leadership, the Company announced two multi-year contracts in the third quarter worth more than $2 billion combined. Alcoa’s EPS segment was awarded a $1.1 billion Pratt & Whitney contract to supply jet engine components, including the world’s first advanced aluminum alloy jet engine fan blade forging. The agreement also includes developing a fan blade forging using Alcoa’s third-generation Al-Li alloy for Pratt & Whitney’s PurePower® engines.

Alcoa’s GRP segment signed a multi-year supply contract with Boeing worth more than $1 billion, the largest ever between the two companies. The agreement includes future collaboration on advanced aerospace alloys.

In the automotive business, GRP produced a record volume of automotive sheet in the third quarter to meet increasing demand for aluminum-intensive vehicles. The Company’s Davenport, Iowa facility continued to ramp up production and is supplying Ford with high strength automotive sheet made with a military-grade aluminum alloy for the new F-150. The auto expansion in Alcoa, Tennessee is on schedule to open in mid-2015.

In the Wheels and Transportation Products business, Alcoa rolled out its lightest ever heavy-duty truck wheel in Europe to help fleets increase payload and fuel efficiency. The Ultra ONE™ with MagnaForce™ alloy will be available in Europe during the second half of 2015.

Upstream Portfolio Transformation

In the upstream, Alcoa continues to take strategic actions to create a globally competitive commodity business, reducing high-cost operating smelting capacity by 1.2 million metric tons, or 28 percent, since 2007. The Company is also executing previously announced smelter closures to further optimize its commodity portfolio.

In the third quarter, Alcoa announced plans to permanently close its primary aluminum smelter in Portovesme, Italy, which has been curtailed since November 2012. The closure will reduce Alcoa’s global smelting capacity by 150,000 metric tons. The Company also safely completed the previously announced closure of the 190,000 metric ton Point Henry smelter in Australia. In addition, Alcoa reached an agreement for Sural Laminated Products of Canada, Inc. to acquire the 90,000 metric ton Bécancour, Quebec rod mill.

Future actions to further reshape the commodity business, include:

• After signing a letter of intent in the second quarter, Alcoa continues to pursue a potential sale of its ownership stake in Alcoa Minerals of Jamaica L.L.C., which operates the Jamalco bauxite mine and alumina refinery; and
• Alcoa and the Government of Suriname have signed a Memorandum of Understanding committing both parties to a strategic review of the Company’s Suralco operations.

In Saudi Arabia, progress continued at the Ma’aden-Alcoa joint venture. The smelter is fully operational and generated profits in the third quarter. The refinery, which will be the lowest-cost in the world, is 98 percent complete and the bauxite mine is 73 percent complete.

Investing in the world’s lowest-cost aluminum complex and closing high cost capacity supports the Company’s goal to lower its position on the world aluminum production cost curve to the 38th percentile and the alumina cost curve to the 21st percentile, by 2016.

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