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Friday, March 29, 2024

Do You See What Happens, Alcoa, When Your “Restructuring” Non-GAAP Addbacks Tumble

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Moments ago, the company that traditionally kicks off earnings season did just that, and sent the ball into a throw in. The reason: just like all the other companies that have reported and pre-reported so far in the third quarter, its results were a huge miss: AA reported non-GAAP EPS of $0.07 missing expectations of $0.13, on revenues of $5.57 billion, a 10% drop Y/Y, also missing top-line estimates of $5.75.

And while the company did have some justifications for the collapse, blaming what else but China…

In China, Alcoa lowered its estimate for 2015 automotive production growth to up 1 to 2 percent, from up 5 to 8 percent; reduced its projection for 2015 heavy duty truck and trailer production growth to down 22 to 24 percent, from down 14 to 16 percent; reduced its 2015 commercial building and construction sales growth to up 4 to 6 percent from up 6 to 8 percent; and kept its 2015 packaging estimate unchanged at up 8 to 12 percent.

… the real culprit is none of that. Because, as regular readers know very well, with Alcoa it is all about the Non-GAAP addbacks…. and the problem here is that while in previous quarters Alcoa’s “restructuring” charges were vast, usually eclipsing the actual GAAP earnings number, in Q3 they tumbled to “only” $66 million – the lowest since March 2013.

They are shown as follows:

Because that $0.07 EPS, that was non-GAAP. On a GAAP basis, Alcoa generated a paltry $44 million in Net Income, down 70% from a year ago, which translates into 2 cents per share.

And just to show what Alcoa’s true EPS picture looks like, now that its restructuring charge “addbacks” are finally grinding to a halt, in the past year, GAAP Net Income was just $538 million. What about non-GAAP net income: more than double that or $1.154 billion. And that’s why, as Alcoa’s Non-GAAP myth is about to collapse into the company’s GAAP reality, its P/E is about to double… just as the company’s topline is tumbling.

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