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Getting Ridiculous: 70% Of Alcoa's LTM "Earnings" Are From Restructuring Charges

Tyler Durden's picture




 

When the non-GAAP "consensus earnings" bogey that Alcoa has to hit has been cut by a third from $0.30 as of 6 months ago to just  $0.22 one would think the company's EPS should be an easy beat.

 

One would be wrong, because moments ago AA just reported non-GAAP EPS of $0.19, a big miss of the expected $0.22.

And we should stress non-GAAP, because as regular readers know when it comes to Alcoa's "earnings", it is all about restructuring charges. This quarter was no different and Klaus Kleinfeld's company decided to "charge off" another $217 million in "one-time, non-recurring" addbacks.

Wait, did we say "one-time, non-recurring"? The reality is that for Alcoa this is the 9th consecutive quarter in which it has booked more than $100 million per quarter in restructuring charges! 

 

Pperhaps at some point the FASB should take a peek at Alcoa's books for the greatest definition ever of just what "non-recurring" addbacks really mean.

And since we know it won't, here is the answer: in the past year, Alcoa has generated $643 million in clean, GAAP earnings. It has also taken a benefit for $991 million in restructuring charges. This means that of Alcoa's $1.4 billion in Non-GAAP LTM EPS, a whopping 70% of "earnings" come from non-one time, recurring "one-time, non-recurring" charges and addbacks.

At this point the EPS accounting fudgery is so ridiculous, even 5-year-olds get it.

And the real problem is that all S&P 500 companies do it, in fact of the 112 or so in projected non-GAAP EPS, some 15 or so is now totally fabricated "addbacks" which also means that the market's real P/E multiple is about 21x.

No wonder the NYSE has to break at the first more serious hint of selling.

 

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Wed, 07/08/2015 - 16:57 | 6287206 Squid Viscous
Squid Viscous's picture

BUY! it's a global recovery!

Wed, 07/08/2015 - 17:06 | 6287257 BandGap
BandGap's picture

CNBC doesn't think it's serious fudgery. It's all smooth, chocolatey goodness. MMMMMMMMMMmmmmmm

Wed, 07/08/2015 - 17:09 | 6287275 Squid Viscous
Squid Viscous's picture

yeah, that was like 70% ago... well at least the price of cat food has stabilized, yum!

Wed, 07/08/2015 - 17:26 | 6287338 VegasBob
VegasBob's picture

It's all smooth chocolately goodness, eh?

The trouble is that if you bite into it, it still tastes like a turd.

Wed, 07/08/2015 - 17:56 | 6287479 johngaltfla
johngaltfla's picture

I think the wording needs to be legally changed to indicate the accuracy of said reports:

"This Earnings Report brought to you by the Bureau of Labor Statistics"

Wed, 07/08/2015 - 18:44 | 6287683 MrTouchdown
MrTouchdown's picture

Add Backs are the new CapEx! Sounds good, right?

Wed, 07/08/2015 - 17:08 | 6287269 goldhedge
goldhedge's picture

Show the ChiCOMS how it should be done.

Wed, 07/08/2015 - 16:58 | 6287211 venturen
venturen's picture

$100 Million isn't a Wall Street traders Hampton house....let me know when they start losing real money

Wed, 07/08/2015 - 17:41 | 6287414 r101958
r101958's picture

Well, that will be 'ditto' for Microsoft now.

Wed, 07/08/2015 - 17:00 | 6287218 davidalan1
davidalan1's picture

"Getting ridiculous"?  cmon

Wed, 07/08/2015 - 17:10 | 6287287 tc06rtw
tc06rtw's picture

   Correct!
 
  In future, the terminology to use is:
 
                          “… is so ridiculous that…”

Wed, 07/08/2015 - 17:00 | 6287219 max2205
max2205's picture

Liars are as lying do......or something like that  

Wed, 07/08/2015 - 20:01 | 6287914 Colonel Klink
Colonel Klink's picture

Fake it till you make it!

Wed, 07/08/2015 - 17:00 | 6287221 Budnacho
Budnacho's picture

*Sits back...makes popcorn*....Oh man is this gonna be Spectacular when it goes!!!

Wed, 07/08/2015 - 17:04 | 6287249 taketheredpill
taketheredpill's picture

Or they can just stop trading like China.  Stock prices stop falling.  Puts decay to squat.  Then re-start.

 

Wed, 07/08/2015 - 17:02 | 6287230 Squid Viscous
Squid Viscous's picture

the nazi guy Claus was sposed to be on CNBC ... hw did he spin it?

Wed, 07/08/2015 - 17:04 | 6287240 knukles
knukles's picture

We incinerated some folks

Thu, 07/09/2015 - 07:27 | 6289151 de3de8
de3de8's picture

We smelted some folks

Wed, 07/08/2015 - 17:17 | 6287307 bdc63
bdc63's picture

He didn't have to "spin" anything ... it's freaking cnbc.  they throw softballs so that the ceo's can hit them all out of the park.

Wed, 07/08/2015 - 17:03 | 6287235 SmokinMonkey
SmokinMonkey's picture

Well I did my part and recycled a soup can so Alcoa makes even less next quarter.  

Wed, 07/08/2015 - 17:06 | 6287262 Peter Pan
Peter Pan's picture

I stopped soft drinks altogether.

Wed, 07/08/2015 - 17:15 | 6287303 Consuelo
Consuelo's picture

I stopped eating out of aluminum pots & pans out of fear from Alzheimers.   Or did I...?   

Wed, 07/08/2015 - 17:18 | 6287313 Salah
Salah's picture

It's the deodorant that really gets you.

Wed, 07/08/2015 - 17:04 | 6287237 disabledvet
disabledvet's picture

Fuck you Harvard!

Signed...DARTMOUTH

Wed, 07/08/2015 - 17:04 | 6287248 Peter Pan
Peter Pan's picture

Why does any of this surprise anyone?

Does anyone have a chart or graph showing was dividends have been paid in total year by year by the various companies on the stock market?

Does anyone have a chart showing how much tax each of these companies have paid year by year?

Does anyone really give a shit?

Wed, 07/08/2015 - 17:05 | 6287251 Sudden Debt
Sudden Debt's picture

Mostly management if you do’the math calculating layoff charges.

I heard about the same thing at grainger where they actually pull up lists with management in europe that needs to go.

I sometimes wonder if all those companies go to the same seminars explaining these tricks...

it’s always as "now this management trick is popular so let’s all do this and that!"

 

Wed, 07/08/2015 - 17:18 | 6287315 disabledvet
disabledvet's picture

Long after they fire themselves they still won't make the numbers.

Sometimes I think the answer really is fishing.

Greece STILL has no reopened their Banks.

Why bother?

Was there ever a "deal" where they didn't get annihilated?

Sometimes you really do do best by just staying home...

Wed, 07/08/2015 - 17:06 | 6287260 SillySalesmanQu...
SillySalesmanQuestion's picture

"Nine consecutive quarters..." HA! More like nine consecutive years...What a bunch of bullshit (WABOB).

Wed, 07/08/2015 - 17:08 | 6287266 Rainman
Rainman's picture

This here company is a systemically important member of the USgAy national defense network. Falsifications are authorized....indeed, encouraged.

Wed, 07/08/2015 - 17:10 | 6287280 Ward cleaver
Ward cleaver's picture

Made up numbers in a made up market in a made up society. The charade will go on until the middle class revolts in some form. Meanwhile the Alcoa management will receive their options and restricted stock for "meeting expectations". They'll be cashing out all these financial perks before the whole thing comes apart at the seams. Then we'll start over with a new ponzi scheme.

Wed, 07/08/2015 - 17:24 | 6287336 disabledvet
disabledvet's picture

This is the Bailout Addiction...why Hank Paulson really is smarter than you or me.

He understood what was wrong still needed to be done...and he did it.
"With prayer" indeed.

Now everything is up to everyone else...that somehow they can get "off the Juice" of QE and "no growth forever."

Wed, 07/08/2015 - 17:10 | 6287281 thecondor
thecondor's picture

Bullish***

Wed, 07/08/2015 - 17:14 | 6287288 Squid Viscous
Squid Viscous's picture

Mortimer take them out of the DJIA immediately, if not sooner! what?

Wed, 07/08/2015 - 17:13 | 6287295 cn13
cn13's picture

Lying and cheating in business are no longer considered crimes in the U.S.

In fact, they are now the "New American Way."

Wed, 07/08/2015 - 17:14 | 6287299 yogibear
yogibear's picture

Financial crimes are now legal according to Obana's Just-Us department.

Wed, 07/08/2015 - 17:20 | 6287321 g speed
g speed's picture

bidness is slowed---gotta show the bottom line---sharpen the pencil---

Wed, 07/08/2015 - 17:20 | 6287322 Salah
Salah's picture

Excellent piece, Tylers.

Wed, 07/08/2015 - 17:29 | 6287355 willien1derland
willien1derland's picture

I can only imagine the disdain, comtempt, & utter disgust by which future generations will rightly judge us for the collective misrepresentation, distortions, & outright lies that were promoted as "wisdom" - God forgive us & give us the capability to stand for the truth.

 

Wed, 07/08/2015 - 17:36 | 6287391 tarabel
tarabel's picture

 

 

Unless they invent a campfire-powered wifi system, they will have no idea of what happened at this point in time.

Wed, 07/08/2015 - 18:19 | 6287567 Vinividivinci
Vinividivinci's picture

@tarabel...if I could, I would give 5 up-arrows,...

Wed, 07/08/2015 - 17:30 | 6287360 davidalan1
davidalan1's picture

Just in on CNBC..."Alcoa UP on earnings  5:30pm EDT

Wed, 07/08/2015 - 17:32 | 6287378 Soul Glow
Soul Glow's picture

Just in on CNBC..."Whole bunch of bullshit" 5:30pm EDT

Wed, 07/08/2015 - 17:40 | 6287409 Squid Viscous
Squid Viscous's picture

Cramer said this was a "no brainer" at $17...sick little kike

Wed, 07/08/2015 - 17:30 | 6287366 Soul Glow
Soul Glow's picture

Arther Anderson was working overtime on this one.

Wed, 07/08/2015 - 17:37 | 6287399 Yen Cross
Yen Cross's picture

  I thought ALCOA specialized in aluminum mining and production. [scratching head]

  Unbeknownst to me, they actually specialize in mining and producing Ridiculum®

Wed, 07/08/2015 - 19:22 | 6287781 Atomizer
Atomizer's picture

See below. 6160/ different temperature temper (t3 to t6). 7070/7075 is used for aircraft temperament. That is sold out.

6160 or 6163 are industrial use. Temperament applies to project based on tensile strength. Rigidity. 

Wed, 07/08/2015 - 17:52 | 6287460 cougar_w
cougar_w's picture

Long futures in Unobtainium

Wed, 07/08/2015 - 18:07 | 6287530 WTFUD
WTFUD's picture

The addbacks add up.
Everything's just an illusion.

Wed, 07/08/2015 - 18:10 | 6287533 Bennie Noakes
Bennie Noakes's picture

All those sell-side articles you see claiming that PE ratios are not that much above historical norms are not taking into non-GAAP earnings puffery into account. Before the dot-com era, companies couldn't get away with sweeping losses under the rug by declaring them to be "one time" events. Using the reporting standards of the last century, earnings would be much lower now and real PE ratios are much higher.

Wed, 07/08/2015 - 19:08 | 6287754 Atomizer
Atomizer's picture

Fuck ALCOA aluminum pricing. Watch and learn. It all starts with LME, this gets trickled down. 

Midwest (USA) Aluminum Premium - Metal Prices

Wed, 07/08/2015 - 20:43 | 6288048 ajkreider
ajkreider's picture

Earnings sucked. But I will take the fact they beat on revenue as fairly bullish. earnings are easy to fudge, revenue not so much - which is why renenue beats are rare.

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