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Alcoa Meets EPS Forecast On Rise In Revenue, Free Cash Flow Turns Negative

Tyler Durden's picture





 

Alcoa was expected to generate $(0.03) in EPS in Q4 and so it did. However, it took it 5.99 billion in top line revenue just to not miss traditionally lowered Wall Street estimates. This compares to the $5.7 billion it was expected to make: so there goes your margin. And when one looks at EPS on a purely operational basis, the Company had a loss from operations of $193 million or $(0.18) EPS which included a $74 million benefit from taxes. But of course who cares: after all Alcoa reported "restructuring and other charges" of a whopping $232 million for the quarter, just to make sure everything is apples to oranges. Otherwise the reported $445 million in EBITDA (on $449 million in consensus) would have been more like $200 million. Even so: EBITDA margin dropped from 13.8% in Q4 2010, and 12.8% in Q3 2011, to a measly 7.4% in Q4 2011. Other notable items: CapEx jumped from $325 million in Q3 to $486 million in Q4, meaning that based on the traditional Free Cash Flow definition of EBITDA-CapEx, that used for bond indenture purposes, Alcoa actually burned cash in Q4. Finally, the company forecasts global aluminum demand and supply deficit (probably does not explain why it has been shuttering smelter capacity all around the world) of 7% in 2012- a big drop from recent years. All in all - not quite the right way to start the new year.

So that's the data ex-spin. Here is how management presented it:

4Q 2011 Highlights

  • Loss from continuing operations of $193 million, or $0.18 per share; excluding special items, loss from continuing operations of $34 million, or $0.03 per share
  • Revenue of $6 billion, down 7 percent sequentially, up 6 percent from 4Q 2010
  • Cash from operations of $1.14 billion, up $653 million from 3Q 2011
  • Record low days working capital
  • Free cash flow of $656 million
  • Cash on hand of $1.9 billion
  • 531,000 metric tons of capacity closed or curtailed to improve competitive position
  • Forecasting 7 percent growth in global aluminum demand and a global aluminum supply deficit in 2012

“Alcoa turned in solid performance in a volatile year by responding quickly to changing market conditions and relentlessly managing cash. We stayed focused on growth and took aggressive action to cut costs, improve our competitiveness, and strengthen our balance sheet,” said Alcoa Chairman and CEO Klaus Kleinfeld.

“For 2012, we expect global aluminum demand to grow 7 percent and are forecasting a global deficit in primary aluminum supply.”

Alcoa’s growth projection is ahead of the 6.5 percent rate required to meet the Company’s forecast of a doubling in global aluminum demand between 2010 and 2020. Aluminum demand grew 10 percent in 2011 on top of 13 percent growth seen in 2010.

Alcoa also projects that growing demand for aluminum, combined with market-related production cutbacks, will result in a global aluminum industry deficit of 600,000 metric tons in 2012.

Alcoa projects global growth in the aerospace (10-11 percent), automotive (3-8 percent), commercial transportation (2-5 percent), packaging (2-3 percent), and building and construction (4-5 percent) markets.

Net result: AA flat after hours which may be good considering today's run up into the close.

Full earnings here.

 

 


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Mon, 01/09/2012 - 17:27 | Link to Comment Irish66
Irish66's picture

Constar short

Mon, 01/09/2012 - 17:31 | Link to Comment SheepDog-One
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Lookin good, bitchez, definite tailwind here we're off to recovery land! No QE needed at all, now lets get busy pumping those futures, boys!

Mon, 01/09/2012 - 17:36 | Link to Comment Irish66
Irish66's picture

not so quick, this has some big implications.

Mon, 01/09/2012 - 17:37 | Link to Comment SheepDog-One
SheepDog-One's picture

Nothing a bit of headline spin wont fix in an instant!

Mon, 01/09/2012 - 17:40 | Link to Comment Irish66
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wanna bet?

Mon, 01/09/2012 - 17:42 | Link to Comment SheepDog-One
SheepDog-One's picture

I'm sorry sir....I do NOT gamble!

Besides, let me have a bit of fun, I'm just trying out my chops as a CNBC headline writer!

Mon, 01/09/2012 - 17:46 | Link to Comment Irish66
Irish66's picture

Sheep you were on a roll today with all your posts.  I was trying to put you over the edge.

I still can't hire you as a writer, sorry.

Mon, 01/09/2012 - 20:10 | Link to Comment lotsoffun
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BAC and GS going to rock this week.  can't be any other way.

 

Mon, 01/09/2012 - 17:34 | Link to Comment Chappy
Chappy's picture

Estimates were $0.20 a share back in October.  Glad to see they were able to meet the substantially lowered expectations.  And somehow this is bullish and the stock is up .8% after hours. Not too negative is the new positive.

Mon, 01/09/2012 - 17:38 | Link to Comment SmoothCoolSmoke
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AA now RED AH.  Look for a down open tomorrow as the smoke and mirrors clear.

Mon, 01/09/2012 - 17:41 | Link to Comment SheepDog-One
SheepDog-One's picture

Aw darn it, and just when things were lookin so good with huge rise in 'consumer credit' and all. People SHOULD have been buying BEER on credit!

Mon, 01/09/2012 - 21:37 | Link to Comment Vampyroteuthis ...
Vampyroteuthis infernalis's picture

(Crappy) Beer will be the only thing they can afford!

Mon, 01/09/2012 - 17:35 | Link to Comment J 457
J 457's picture

Shutting down a few EU plants as well, now that should really help them dodge recession.

Mon, 01/09/2012 - 17:35 | Link to Comment LawsofPhysics
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Wow, is it time to sell the news yet?

Mon, 01/09/2012 - 17:42 | Link to Comment J 457
J 457's picture

Sell now, or just hold in your long-term portfolio until 2019, or so.  It must eventually recover, right??  Or just buy MCD, GMCR, NFLX, and now DNDN.  I here (maybe?) you can't lose.

Mon, 01/09/2012 - 17:36 | Link to Comment navy62802
navy62802's picture

The world is broke. Thus, the world isn't building shit. Thus low demand for raw materials. Not really all that surprising to me.

Mon, 01/09/2012 - 20:09 | Link to Comment lotsoffun
lotsoffun's picture

i just realized the 'second coming'!  jesus was a carpenter.

votes up??  please??

 

Mon, 01/09/2012 - 17:45 | Link to Comment apu123
apu123's picture

Didn't you guys see the headline on CNBCialis, poor earnings are now bullish for stocks because expectations will be lower!  Also Bob Pisani said all of us gloom and doomers will be depressed because no earnings implosion is going ot happen, we can all party like its 1999.

All of this in a worsening EU environment.  These guys can't even come up with new rumors anymore, they just re-hypothecate old ones.  This whole Greek and Italian situation is just like ground hog day, I feel like I have lived through it before.  How long can they keep this thing going?

Mon, 01/09/2012 - 17:52 | Link to Comment SheepDog-One
SheepDog-One's picture

People think it can go on for a long time, however what is needed now is another big reset. No POINT in just 'keeping it going'.

Mon, 01/09/2012 - 20:34 | Link to Comment LooseLee
LooseLee's picture

Piss-On-Me is a disgrace to the whole MSM profession. He is a Pollyanna Establishment Shill who does what he does because he is a COWARD. If he had any cahones he would tell it the way it is, but he always embellishes towards the Bulltard line. He will one day have to answer to the masses for not having enough courage to stand up for what is RIGHT and TRUE (ditto for Cramer, Kudlow, Cabrera, and Kernen)...

Mon, 01/09/2012 - 17:49 | Link to Comment Caviar Emptor
Caviar Emptor's picture

THey're cutting back 12% of aluminum smelting operations. 

That's traditionally a huge tell on housing and the general economy. 

Can't have a recovery without more aluminum. 

This is a contraction. Layoffs are planned too

Mon, 01/09/2012 - 17:53 | Link to Comment SheepDog-One
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Usually in a recession you can depend on beer sales going way up, not this time though.

Mon, 01/09/2012 - 17:56 | Link to Comment apu123
apu123's picture

That's weird, the gas station down from my house will accept EBT for beer so you would think it would be flying off the shelf.  Maybe we have crossed the line and are now in cheap scotch territory?

Mon, 01/09/2012 - 18:01 | Link to Comment youngman
youngman's picture

I drank a lot of beer this weekend...so there...burp

Mon, 01/09/2012 - 20:06 | Link to Comment lotsoffun
lotsoffun's picture

bottles or cans?

 

Mon, 01/09/2012 - 18:16 | Link to Comment Zero Govt
Zero Govt's picture

looks like Rothchild and JP Morgan bought into Alcoa at the wrong time ...bad timing and tough tits boys, you'll just have to rig the aluminium market to 'win' back your losses as per your usual biz practices

Mon, 01/09/2012 - 18:27 | Link to Comment Jlmadyson
Jlmadyson's picture

All the lowering of overall expectations came in handy for the headlines. Not enough lowering to cover the base of what is coming however.

Mon, 01/09/2012 - 18:41 | Link to Comment John Law Lives
John Law Lives's picture

"Alcoa was expected to generate $(0.03) in EPS in Q4 and so it did."

Sure it did... after EPS projections were steadily lowered from $0.21 per share to the current target over the last 90 days:

http://finance.yahoo.com/q/ae?s=AA+Analyst+Estimates

It must be nice to be able to move the bar lower and lower until you are assured of clearing it so you can claim victory in the press.

 

Mon, 01/09/2012 - 19:02 | Link to Comment Rainman
Rainman's picture

yah.....Those emergency powers shot caller's got a nice gig

Mon, 01/09/2012 - 20:43 | Link to Comment LooseLee
LooseLee's picture

Yup. And the shills on CNBC will one day be held accountable...not to mention the sell-side analysts. It will be a time of glorious justice as those who aided and abetted the raping and pillaging of the average 'Joe' is made to make penance for the sins he has committed! Those reading this KNOW WHO THEY ARE....

Mon, 01/09/2012 - 19:04 | Link to Comment chump666
chump666's picture

Anyone buying the AA dip 100% deserve to be brutalized by Wall Street sellers.

*Alcoa Inc. (AA), the world's largest aluminum maker, posted a fourth-quarter loss, largely due to slumping prices and charges to curtail high cost production in Italy, Spain and the U.S.

 

Mon, 01/09/2012 - 20:16 | Link to Comment orangedrinkandchips
orangedrinkandchips's picture

Hats off to Zero-Hedge and "Tyler".....I mean jeez, I am a sarcastic jackass but he trumps me....which is so refreshing....hilarious even....

 

exit....stage left

Mon, 01/09/2012 - 21:23 | Link to Comment Randall Cabot
Randall Cabot's picture

 

 

Asia Markets Archives | Email alerts

Jan. 9, 2012, 7:56 p.m. EST

Asia stocks up after Alcoa results, Europe talks

By Sarah Turner, MarketWatch

SYDNEY (MarketWatch) — Asian shares gained Tuesday after U.S. aluminium giant Alcoa Inc. released quarterly results and amid some signs of progress in talks to tackle Europe's ongoing debt crisis.

http://www.marketwatch.com/story/asia-stocks-up-after-alcoa-results-europe-talks-2012-01-09?link=MW_home_latest_news   

 

 

 

Mon, 01/09/2012 - 21:29 | Link to Comment surf0766
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Burning Cash causes global warming!!!!!!!!!!!!!!!!!!

Mon, 01/09/2012 - 22:23 | Link to Comment roy10
roy10's picture

What's the forecast for Q1?

Tue, 01/10/2012 - 00:17 | Link to Comment Yardfarmer
Yardfarmer's picture

 On whether U.S. stocks are also the 'cleanest dirty shirt':


"They are. But in this case, we have to ask the question. Alcoa is going to be very important as will other firms. To what extent are they being hit on revenue? To what extent can they continue to contain costs? We're going to get lots of information."  Mohammed El Arian

Tue, 01/10/2012 - 01:31 | Link to Comment Dorky
Dorky's picture

Who or what in the world is bidding up Alcoa?

Tue, 01/10/2012 - 01:31 | Link to Comment Dorky
Dorky's picture

Who or what in the world is bidding up Alcoa?

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