Tuesday, September 19, 2006

pump up the eps / earningsquality

denke das spiegelt gang gut wieder was in sachen buyback in den usa abgeht um
die eps zu pushen.

von autozone / azo

Net income for the quarter increased 3.3% over the same period last year to $213.5 million, while diluted earnings per share increased 9.6% to $2.92 per share from $2.66 per share reported in the year-ago quarter.

Same store sales, or sales for stores open at least one year, were down 0.9% for the quarter.

Under its share repurchase program, AutoZone repurchased 3.7 million shares of its common stock for $340.0 million during the fourth quarter, at an average price of $91 per share. For the fiscal year ended August 26, 2006, AutoZone repurchased 6.2 million shares of its common stock for $578.1 million, at an average price of $93 per share.

Subtract share
repurchases (339,955) (118,294) (578,066) (426,852)
--------- --------- --------- ---------
Cash flow before share
repurchases and changes
in debt $ 315,513 $ 168,401 $ 599,507 $ 432,210
========= ========= ========= =========

wenn das nicht gesund ist. praktisch der ganze cash flow geht f├╝r bubybacks drauf.
in diesem quartal haben die buyback kosten den netogewinn mal eben um 60% ├╝berschritten.

immerhin hat azo ein bbb+ rating. das ganze geht also nich nicht an die substanz.


update von herb greenberg:

Updated: AutoZone Reality Check

Here's all you really need to know about AutoZone's (azo) fourth quarter results: Sales up 3%, same store sales down 0.9%, sales per square foot down 0.4%, sales per average store down 0.3%, negative operating cash flow, earnings per share UP 14.6% to BEAT analyst estimates by 5%.

Think about it: Sales down, cash flow negative, earnings not just up, but up by a considerable amount. The reason: financial engineering, er, share buybacks, without which earnings per share would've been $2.78, or 1 cent BELOW analyst estimates. The only genuine bright spot was a one percentage point increase in gross margins, but that was due to something called "category management initiatives, which include management of procurement costs, continued optimization of merchandise assortment and an ongoing focus on direct importing initiatives." Put another way, the company did a better job helping itself by lowering wholesale costs while sticking it to its customers with an assortment of higher-priced products.No wonder sales were down: While the company did a better job buying, it wasn't passing along savings to customers, who appear to have noticed.

Furthermore, if you take a look at the numbers, this is a company without any real growth in sales, net income or stock price over the past two years. Yet the stock was up considerably going into this quarter as investors, no doubt, guessed (wink, wink) the earnings per share would be a blow out. Nice quarter, guys.

UPDATE: Oops, misplaced a decimal in the earlier version. (Memo to me: By now I should know not to write or report before you've had the morning espresso.) This from an AZO bear: "Not quite true that DPS would've been $2.78 without share repurchases because cash used to buy shares would've paid off debt, hence lower interest expense. The point is that AZO has failed to generate any sales and market share traction despite management's so-called initiatives. Fourth-quarter EBITDA magin has never been higher yet sales per square foot, inventory turnover, etc, are making multi-year lows. Is this the right way to runa business for the long-term they claim they care so much about?" Wouldn't appear to be so.


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