Alcoa Inc shares rose on Thursday after the aluminum producer reported its first profit in a year, in what Wall Street viewed as a bellwether of how industrial companies are recovering from the recession.

The surge in Alcoa -- the first member of the Dow Jones Industrials <.DJI> to report results for the latest quarter -- pulled up other U.S. aluminum producers too.

Six brokerages raised their price targets on Alcoa and narrowed fourth-quarter and full-year loss estimates for the company on expected progress on its cost-cut initiatives and improved aluminum pricing.

But some analysts also cautioned that markets remain weak and might have a negative impact on future Alcoa results.

On Wednesday, Alcoa surprised the financial community, which had expected it to report a fourth consecutive loss, by posting a net third-quarter profit of $77 million.

Alcoa's stock rose over 6 percent when the New York Stock Exchange opened on Thursday but by the afternoon, it had come off its highs and was 2.1 percent ahead at $14.50. On Nasdaq, Century Aluminum Co rose $1.11, or 11.5 percent, to $10.76 and Kaiser Aluminum Corp was $1.26, or 3.4 percent higher at $38.36.

Alcoa, which has curtailed metal production by more than 20 percent and cut its workforce by about 30 percent since the economic downturn began a year ago, said there are signs that key markets are stabilizing.

Currently, analysts expect Alcoa to report a 6-cent-per-share profit for the fourth quarter and a loss of 83 cents per share for the full year 2009, according to Thomson Reuters I/B/E/S.

But one analyst, Anthony Rizzuto of Dahlman Rose, lowered his earnings estimate for full year 2010, citing uncertainty over aluminum demand in some of Alcoa's markets.

Key end markets remain challenging over the near-term, he wrote in a research note. He noted U.S. automotive sales had dropped in September after the stimulus of the cash-for-clunkers program ended.

Further, we remain concerned about the commercial building and construction market and the industrial turbine market. We are positive on the long-term outlook for these markets, but over the near-term, they may face further headwinds, Rizzuto wrote.

But he increased his 2009 and 2010 aluminum price forecasts. While an inventory overhang of approximately 4.6 million metric tons remains on the LME (London Metals Exchange), we continue to believe that a significant portion of this material is tied up under long-term financing arrangements and that aluminum prices should firm, to possibly trend higher, as economic conditions improve.

And RBC Capital Markets said although Alcoa reported progress reaching cost targets, its near-term outlook remains weak.

Energy costs are rising, the company is cautious on all rolled product end-use markets ... and seasonal shutdowns are expected to hurt results, RBC Capital analyst H. Fraser Phillips said.

(Reporting by Steve James, editing by Gerald E. McCormick)

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