The "cheerleading" behind Alcoa's (NYSE: AA) results is amusing this morning, given the market's reaction to the earnings announcement, hammering the stock by more than a buck and a quarter a share in the aftermarket.

• Cash from operations in 4Q09 of $1.1 billion.
• Free cash flow (FCF) of $761 million; FCF positive for first time since 2Q08.
• Exceeded every operational cash sustainability target in 2009.
• Loss from continuing operations of $266 million, or $0.27 per share.
• Net charges for restructuring, special items and discrete tax items were $275 million, or $0.28 per share, in 4Q09.
• Excluding these charges, Company had 2nd consecutive profitable quarter.
• Revenues of $5.4 billion, up 18 percent from 3Q09.
• Strong liquidity with $1.5 billion of cash on hand.
• Debt-to-cap ratio down to 38.6 percent, 390 basis point improvement from year ago.
• Total debt reduced by $759 million since end of 2008.
• Finished 2009 with stronger portfolio, growth opportunities and operations.

Nice cheerleading Alcoa.  Ignoring the elephant in the room, eh?

Ex-items the company posted a 0.01 EPS, far short of the expected 0.06. 

On the positive side the firm cut debt by some $750 million dollars, which sounds impressive over the year - until you realize they have over $10 billion in debt outstanding.  Reducing leverage by about 7%?  That's not all that impressive after all, is it?

Cash from operations for the quarter was $1.1 billion, and the firm finished the quarter with $1.5 billion in cash on hand.  Wait - they have no real "hoard" behind their book at all?  That's not so good either.

CapEx is down 50% from 2008 on a run rate, which begs the question - was previous CapEx fat or was it lean muscle?  If the former it's good, but if the latter then forward profitability will be in serious trouble.

Speaking of which, COGS (cost of goods sold) ramped hard to 91% .vs. 84.8% on a year-over-year basis.  That's a problem, as is the drop in engineered product operating income drop to $57 million .vs. $75 million last quarter.  Those products are the high-margin "pearls" in the firm's portfolio and largely go into aerospace and other high-dollar, high-precision markets.  They're down big.

Primary metals also suffered a loss, mostly on the increased cost of energy inputs.  Oh, you mean energy costs are bad news when you're a miner and smelter?  No kidding eh?  And don't look inside the report - produced tonnage is down 20% annualized over 2008 levels.  (Editorial: I thought 2008 was a horrible year and comps would be easy?)

Flat rolled product (sheets of aluminum, basically) shipments were down 2%.  Again, where's the recovery?  If final demand is improving (even if only temporarily due to inventory restocking) why are we seeing decreased shipments?

I'm not impressed, and on the conference call the company noted expected continued weak market conditions for the forward quarter.

Those who were expecting blow-outs this quarter in the reports, and glowing forward looks need to go listen to that conference call and read Alcoa's report in detail.

That light at the end of the tunnel looks like an awful lot like an oncoming train.

Disclosure: No position