Thursday, August 13, 2009

"Reported Earnings vs Operating Earnings"

I´ll repeat what i have said in my post But Still Better Than Expected....
Thank god that real earnings don´t matter...until they matter..Some still call the market "cheap"...... No problem with the right pro forma ( What are pro forma earnings? ) model/formular.... Havn´t heard the word GAAP for a long time..;-)
Ich wiederhole einfach das was ich in meinem Posting But Still Better Than Expected........ gesagt habe.....
Gottseidank wird ja den realen Gewinnen momentan keinerlei Bedeutung beigemessen und das alle Schätzungen auf den berühmt berüchtigten EBITDA bzw Proformabasis ( ex dieses, ex jenes, usw.) basieren......Ansonsten wäre das KGV ( wenn es denn überhaupt vorhanden wäre ) auch zu schockierend... Gut zu wissen das einige der Experten den Markt immer noch als "billig" betiteln..... Wenn man die richtige "Proformakalkulation" (siehe What are pro formaearnings? ) zugrunde legt sicher kein Problem.... Ich jedenfalls wundere mich schon lange nicht mehr das ich den Gewinnausweis nach der einheitlichen Bilanzierungsvorschrift GAAP nur nach lagem suchen im Kleingedruckten der Quartalsberichte finden kann..... Vor alternativen Analysten und Unternehmenskreationen wie EBITDA ( oftmal noch versüßt durch andere "außerordentliche" Belastungen ) usw. kann man sich in der tagtäglichen Berichterstattung hingegen kaum retten.....;-)
Alternative yardsticks for US earnings tell different stories By Paul Marson via FT

Every quarter, US companies publish their results under the defined US GAAP accounting rules. These results are labelled "reported earnings".

However, the most commonly looked at form of earnings are adjusted "operating earnings" on which companies prefer to focus as they onsider these better capture the underlying trend in activity

Adjusted operating earnings exclude non-recurring expenses such as restructuring charges, asset sales gains, major litigation charges, goodwill right downs and other write-offs.
While reported earnings are based on strict accounting rules, adjusted operating earnings are at the discretion of companies because there is no defined set of exclusions
Neither measure is perfect but with adjusted operating earnings, exclusions are currently so large that information about the true state of companies (and therefore the market as a whole) is being excluded.

These exclusions have reached the level where the gap between adjusted operating earnings and reported earnings is so wide that they deliver different messages on the state of US corporates.

Today reported earnings per share for the S&P 500 companies gathered by Standard & Poor's is $7.2 per share, down 91 per cent from the 2007 peak.

On an adjusted operating basis, earnings are $61.2, down 34 per cent from the 2007 peak.

This $54 gap is a record.

How has this come about? Much of the difference between adjusted operating earnings and reported earnings is caused by massive writedowns in the financial sector. However, outside the financial sectors write-offs are also at record highs as corporates are eager to toss out impaired assets during periods of stress.

Furthermore, when looking at adjusted operating earnings, it seems that most US corporates managed to beat their analyst estimates thanks to production and job cuts.

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5 Comments:

Blogger jmf said...


The "Dumb Money" indicator continues to hit new extremes
Technical Take

The Rydex market timers continue to be bullish and leveraged to the extreme. And to round out our sentiment analysis, selling by company insiders has hit extremes as well. It is the perfect trifecta. Whether the perfect trifecta becomes the perfect storm (again) for investors is yet to be determined.


The "Dumb Money" indicator is shown in figure 1. The "Dumb Money" indicator looks for extremes in the data from 4 different groups of investors who historically have been wrong on the market: 1) Investor Intelligence; 2) Market Vane; 3) American Association of Individual Investors; and 4) the put call ratio

The "Dumb Money" Chart

5:39 AM  
Blogger jmf said...

This brilliant piece
Cisco earnings wildly overstated: management milks shareholders for fun and profit

from Ultimi Barbarorum also provides some more "evil" details how the narrow focus on EPS from Wall Street Finest & Management isn´t in the interest of investors ( everybody holding a stock for longer than a few days....)

Denke das dieses Meisterwerk
Cisco earnings wildly overstated: management milks shareholders for fun and profit

von Ultimi Barbarorum sehr anschaulich verdeutlicht welche "Spielchen" zu Lasten der Investoren ( soll ja noch welche geben die Aktien länger als 30 Tage halten ....) unter gütiger Mitwirkung der Analysten gespielt werden......

H/T Felix Salmon

11:24 AM  
Blogger jmf said...

A follow up on options...

Backdating Likely More Widespread WSJ

Researchers at the University of Houston's C.T. Bauer College of Business used a sophisticated statistical test to sift through more than 4,000 publicly traded companies for those with patterns of granting options at abnormally favorable times, often at low points for their share prices.

The study identified 141 companies with such advantageous options-granting practices that the researchers concluded they were highly likely to have been involved in backdating. Ninety-two of those companies never were publicly linked to investigations or announced earnings restatements related to backdating.

11:47 PM  
Blogger jmf said...

München (BoerseGo.de) - Der Vorstandsvorsitzende der Linde AG, Wolfgang Reitzle, hat sich in der vergangenen Woche von Aktien des Industriegasekonzerns im Wert von gut 2,8 Mio Euro getrennt.

Reitzle habe am 14. August 40.000 Papiere aus einem Aktienoptionsprogramm aus dem Jahr 2002 außerbörslich zu einem Preis von 70,06 Euro je Aktie veräußert, teilte das Unternehmen mit.

Reitzle hatte die Aktien im Rahmen des Management Incentive Programms 2002 zu einem Bezugspreis von je 32,38 Euro erworben

11:49 PM  
Blogger jmf said...

Update on backdating


Perfect Timing / Chart

6:29 AM  

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