Long-time industrial bellwether Alcoa (AA) reported earnings after the bell Thursday lower than expectations, though revenues came in stronger than expected. Alcoa reported an actual $0.04 earnings per share on revenues of $5.6 billion in its 4th quarter, higher than the $5213 million expected by the Zacks Consensus Estimate, but two cents lower on the bottom line, a 33% negative surprise in EPS.
The company tied $1.7 billion in costs related to legacy smelting operations, and realized aluminum prices fell 7% year over year (which has been a constant bugaboo for Alcoa and other aluminum companies for the past several quarters). Further, just today Alcoa announced it has reached a settlement with the SEC and DOJ regarding bribery charges to Bahraini officials. Though these numbers do not show up in AA’s fiscal 2013 report, the company has agreed to pay five installments of $161 million over the next four years.
That said, free cash flow is positive at $498 million, with $1.4 billion in cash on hand. Improved liquidity was one of Alcoa’s goals for the quarter.
So while aluminum prices seem to remain a sticking point for Alcoa and others such as Rio Tinto (RIO), the global economic recovery looks to be underway, which should be a long-term positive for Alcoa. It would also make today’s agreed-upon settlement charges go down easier to know that overall revenues will pick up once global demand for aluminum products increases.
Finally, let’s not forget Alcoa marks the unofficial start of earnings season. Let the games begin!