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.
[4]
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 [5]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!
[6]
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.
[7]
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.
