Greenberg: Alcoa Earnings Not as Rosy as They Might Appear
With Alcoa coming in with better-than-expected results, one thing to keep in mind: It should all be kept in perspective.
Yes, revenue and earnings were up—but:
On the good news front, free cash flow was positive, but a good part of that came from continued lower spending.
(Memo to me: Look into these in-kind stock transfers to pension funds.) For what it’s worth: Hackel says in the past some companies did these stock transfers as a form of a takeover defense.
By using stock instead of cash, Alcoa no doubt believes its stock is a bargain. However, since the stock transfer occurred in January, Alcoa’s stock price has fallen by about 15 percent.
One other point to consider: Net debt of $8.4 billion at Alcoa, while below last year’s highs, remains at the high-end of its 10-year range and is headed in the wrong direction. At least $1.5 billion is due over the next year-and-a-half.
My take: When companies “beat” earnings it’s important to keep it in perspective. Sometimes it may taste better, but is considerably less filling.
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