Alcoa (AA  ) kicked off the start of the industrial sector's Q2 earnings season by posting a beat on the top and bottom line which sent shares modestly higher. Industrial companies' results are in focus this quarter as it will reveal how much the slowdown has impacted companies' operating results.

In essence, Wall Street was optimistic about the sector until mid-May, when it was up double-digits. However, this changed when the Federal Reserve ratcheted up the intensity of the rate hikes, and these safe havens started to falter. Now, investors are pricing in a recession which meant a more than 20% decline for leading stocks in the sector like AA.

Inside the Numbers

In Q2, Alcoa reported $2.95 in earnings per share which was a sharp increase from last year's Q2 EPS of $1.63 per share. It was also well above estimates of $2.87 per share. Revenue came in at $3.64 billion, a 29% increase from 2021 Q2, and exceeded consensus expectations of $3.45 billion.

Earnings growth was positive as the revenue beat was enough to offset any increase in costs and expenses by $400 million from last year. As a consequence, margins expanded by 324 basis points to 25.1%.

Aluminum revenue was up 6% due to higher shipments and pricing power. Its average realized third-party price per metric ton was $3,864 in the quarter. Its Alumina segment saw a 7% jump in orders, while commodity-grade aluminum shipments were up 9%.

Alcoa also slightly reduced its forecast for annual bauxite shipments to between 44 million dry metric tons and 45 million tons which is less than its previous range of 46 million to 48 million due to disruptions in the market and lower demand from refineries.

Another potential tailwind for the stock is that auto production is returning to full capacity and could even exceed 2019 levels in the coming months. This should be a source of aluminum demand and help Alcoa fight the headwinds of a slowing economy.