S&P raises Alcoa outlook even as stock falls on worries over sales

Standard & Poor's Ratings Services raised its outlook on aluminum company Alcoa Inc.'s debt Tuesday on the expectation that higher aluminum prices and improved demand will help its profit margins.

Alcoa's shares fell sharply Tuesday, a day after the company reported its first-quarter sales were below analyst expectations. The company said sales increased to $5.96 billion from $4.89 billion a year ago, but fell short of expectations from analysts, who were looking for sales of $6.16 billion, according to FactSet.

Stocks were also down Tuesday on broader concerns that fallout from the Japanese earthquake and resulting nuclear crisis could hinder the global economic recovery and reduce demand for manufacturing goods like Alcoa's pressed aluminum.

In spite of the short-term worries, Standard & Poor's upgraded Alcoa's outlook to "stable" from "negative." The ratings agency also affirmed its ratings on Alcoa's debt, including its investment-grade "BBB-" long-term and "A-3" short-term corporate credit ratings. The agency also affirmed its "A-3" commercial paper rating for Alcoa.

"The rating outlook revision reflects our expectation that higher aluminum prices and better end-market demand will likely result in a further improvement in Alcoa's operating performance in the near term," Standard & Poor's credit analyst Marie Shmaruk said in a statement.

Shares of Alcoa fell $1.18, or 6.6 percent, to $16.59 during afternoon trading.