Earnings Reports Should be Relegated to the Dustbin of History
One of my long term problems with the way companies report "earnings" is the various ways they are reported. Would you like before or after tax profit? Earnings per share or earnings per share minus some buybacks? Earnings before losses or earnings after one time losses? the list goes on and on. Take SprintNextel (ticker: S) today. What do you make out of the following report:
Sprint Swings to $29.5B Loss in 4Q on Nextel Deal Write-Down, Ends Dividends, Shares Dive
Sprint Nextel, based in Overland Park, Kan., said it lost $29.5 billion, or $10.36 per share, during the quarter ending Dec. 31. By comparison, the company earned $261 million, or 9 cents per share, during the same period a year ago.
The company said last month it would likely have to write off most of the remaining $30.7 billion in non-cash goodwill value from the acquisition of Nextel and a number of affiliates. Sprint Nextel has struggled since the purchase, plagued by technical problems, unfocused marketing and a difficulty in merging the two companies' work forces into a cohesive whole.
The hurdles have caused the company to fall far behind rivals AT&T and Verizon Wireless in attracting and retaining customers.
Not including the write-down and other one-time charges, the company said it would have earned 21 cents per share, which was higher than the 18 cents per share expected by analysts surveyed by Thomson Financial, based on the same criteria.
It is all right there. Sprint would have made 21 cents per share, BEATING the street by 3 cents, if only they did not write down the 29.5 BILLION dollars that they did. By the way, the market cap of Sprint is at 23 Billion right now. Not including a write down in excess of their market cap, Sprint had a great quarter. Any questions?
Enough with the baloney already. The "Excluding One Time Charges" line is the best as quarter after quarter, year after year those one timers are always there. Last month I made a ridiculous amount of money myself if you exclude one time charges like cable, phone, car, rent, food, taxes, gas, and electricity bills. If only those one timers would stop coming every month I would be rich in no time!
Coming Apart at The Seams
I think that looking back both Ben BernanSpan and Hanky Panky Paulson will look back at the past couple of days and be regretful that they did not keep their mouths shut. I am not sure what is worse, the crap these guys speak or that they get away with it unchallenged time and time again. I guess when faced by the awesome mental power of the US congress, you cannot expect much in the way of tough questions or follow up.
Take BernanSpans comments today. When asked about the dreaded "Stagflation" scenario, Benny Baby responded thus "I don't anticipate stagflation". Well there you go. The FED head that so clearly saw the subprime debacle, the credit crunch, the monoline insurance issues, and the foreclosure tsunami now does not ANTICIPATE stagflation. I find the use of the word "anticipate" very interesting. From Wikitionary, the definitions of anticipate are:
- to act before (someone), especially to prevent an action
- to take up or introduce (something) prematurely
- to know of (something) before it manifests
I would suppose number 3 fits best with his comments here. So BernanSpan does not know that we are in stagflation, and does not believe that is where we are going? OK. Refusing to see something is not the same as not actually seeing it. His track record for predictions aside, where was the follow up question of "if indeed we enter into stagflation, what can/will the FED do about it?" I would love to know his answer to that one.
Not to be outdone, Hanky Paulson was out talking tough trash today. From the man that brought us the Super SIV Plan (that failed), the various mortgage rate freeze plans (Help/Hope Now and such), and lobbied hard to remove any restrictions from the GSE's, we get this handy dandy headline that is the early leader for hipocritical statement of the year, ready for it?:
Paulson Rejects Government Bailouts
I swear I am not making that up! It was on Yahoo Finance, Marketwatch, Bloomberg, etc. Paulson rejects bailouts huh? You cannot make this stuff up anymore.
We are at a point now where it seems almost every figure of power is running around like mad trying to bailout everything and everyone, soothe concerns, and maintain general sentiment. the effort being expended is considerable. It seems to this writer that things are beginning to come apart at the seams. The dollar took another header today. Weak Dell, Sprint, Fannie, and Freddie "earnings numbers were as ugly as can be. The FED head and the Treasury secretary out in public saying dumb things, while not new, has become an almost daily occurrence.
It has been suggested in various forums that right before a serious dislocation, or history changing event occurs, there is usually a flurry of activity across multiple fronts that taken as an aggregate look like a controlled panic. The last 3 months to me resemble such a time. I am not sure this all qualifies without question, but it bears observation. I will not give an anticipation in either direction, I just am trying to make you the reader aware of the possibility. Scary but fun!
Bonus points to the reader that can identify both the film and scene this LOL cat caption is referencing:
Enter the ICHC online Poker Cats Contest!
First comment that gets it correct will get a shout out on the main blog, now isn't that a "Major Award"? (step two: solve the "major award" movie reference for mega bonus points!) Perhaps if people like this we can have a Monthly contest with a paid subscription to the Calculated Risk's awesome newsletter (value $60) as a prize.
Have a good night.