Looks like he already mentioned that.
Looks like he already mentioned that.
Try,
Agreed, documenting the abuse issues as outlined by SEC.
Igy
But all public companies must provide GAAP statements every quarter. If the company also publishes a non-GAAP report, investors can compare them to determine the reason for any discrepancies. That could be very useful information.
Big,
Yes that is true, but as noted in articles I have cited companies and analysts have emphasized the non-GAAP in a manner that confuses investors and masks the true financial performance.
Igy
agip wrote:
Gente, are you out there?
Do you have any quantification on the level of writedowns lately and how they are affecting the GAAP earnings of the SP500?
I suspect it is massive, but I'm sort of guessing here.
Agip, sorry I'm just getting around to this. I checked out SP Capital IQ for Q3 2015 and ranked SP 500 stock's reported earnings EPS ; from worst to best.Some background, reported earnings for all SP 500 stocks for Q3 2014 compared to Q3 2015 fell from $244 billion to $204.6 billion. The top 9 stocks were all Independent Oil and Gas cos with EPS from -$14.70 (APA) to -$4.41 (APC). They reported over $33 billion in unusual expenses, in aggregate. These unusual expenses were predominantly impairments.
http://energylawtoday.foxrothschild.com/page/2/see Impairments: An Indicator; also click on Forbes and Casper Star Tribune links. The 9 stocks are listed below with reported EPS and unusual expenses in the billions.
APA Apache Corp -$14.70; $6.12
MUR Murphy Oil -$9.22; $2.26
DVN Devon Energy -$8.64; $5.99
XEC Cimarex Energy -$8.21; $1.18
NFX Newfield Exploration -$7.52; $1.95
EOG EOG Resources -$7.47; $6.28
CHK Chesapeake Energy -$7.08; $5.55
SWN Southwestern Energy -$4.62; $2.87
APC Anadarko Petroleum -$4.41; $0.89
Here is an article from the BEA you may find interesting
http://www.bea.gov/scb/pdf/2011/03%20march/0311_profits.pdf". In the most exÂ
treme case, in the fourth quarter of 2008, S&P 500
companies reported a loss of $202.1 billion (not annuÂ
alized) after a third-quarter profit of $65.2 billion. This
was associated with the well-publicized writedowns of
prominent financial companies. AIG lost $61.7 billion,
and large writedowns were also recorded by other large
financial companies in the S&P 500, including CitiÂ
group, Bank of America, and Merrill Lynch. In an earÂ
lier example, in the fourth quarter of 2002, S&P 500
reported earnings fell 64.1 percent or $51.0 billion.
This roughly accords with the $45.0 billion loss reÂ
ported that quarter by Time-Warner, at that time the
largest quarterly corporate loss in history. "
(Citigroup lost $17.26 billion)
Also read
http://www.philosophicaleconomics.com/2014/01/cape/The issue with World Com wasn't non-GAAP but on their GAAP accounting. They transferred expenses from their operating account to their capital account (line costs) right under the noses of Arthur Anderson, the rating agencies and 2 investment banks ( JPM and Salomon ) who were arranging a $11.9 billion debt deal and had claimed to do a thorough DD.
Lucent's problem was restatement of revenue. A large amount of sales to CLECs were financed by LU. When a number of them went under LU held a lot of IOUs that were worthless.
mug loca,
OK, I buy your analysis on LU and WCOM. Any comments on the non-GAAP versus GAAP accounting of LNKD, TSLA, or NOW?
Igy
muy loca,
Good work, but I believe what you cite is more back door support for the industry of stock buying. I agree with the comments of Mr. Hester of the Hussman Funds that company earnings should be punished for poor investments and execution. The fact that it reflects poorly on the future cannot excuse the sins of the past. To me it is far to convenient to give a company a pass. It appears the SEC and other non-industry critics support my view.
Igy
S&P 4Q Earnings Report:
"With almost 90% of the Q4 2015 earnings reported, 67.6% of the issues are beating estimates (the historical rate is two-thirds), but only 36.8% beat As Reported GAAP rule based earnings estimates and less than half, 46.8%, beat sales estimates Explained ‘responsibility’ for any short fall on the cost side includes currency costs and a growing list of special one-time items (never to be repeated, of course) On the income side, helping earnings, are the ‘difficult decisions made’ by companies under the heading of cost-cutting (as layoffs and location changes appear to be on the rise)."
S&P 500 4th Quarter 2015 Last Twelve Months (LTM) GAAP earnings tracking at $89.27. High was 3rd Quarter 2014 LTM GAAP earnings of $105.96, a drop of 15.75%, yet analyst are predicting a rise over the course of the year. Folks earnings are continuing to trend down and not up. Look at the drop in financials. It is more than energy and commodities.
Igy
Ghost of Igloi wrote:
Big,
Yes that is true, but as noted in articles I have cited companies and analysts have emphasized the non-GAAP in a manner that confuses investors and masks the true financial performance.
Igy
Yes some companies have done that, but most have not. And it's already been correctly pointed out that GAAP numbers may not paint a complete picture.
So most of the time both sets of numbers are reliable. How do you know if they are? If they disagree to a large extent, take a look at both sets and how they were arrived at. The devil is in the details.
Igy and Gig,
Do you guys mean that people actually READ earnings reports? wtf.
Sarcasm aside, I can't remember when I have actually looked at one of those. These days, you get the data (and data is all that matters) via quantism and you don't need to hunt through any report to get the data YOU want to select stocks. I (no, not I, but my computer) look at data like:
--Forward and ttm PE
--PEG
--1,3,5 year price performance
--1.3.5 eps
You can also go through Quantitative Analysis data with the R programming language and look for indications that are statistically significant.
I usually don't make more than 3 equity decisions a year, but for people like hedge funds and JPM using systems like Capital IQ's Quantfeed (which I also use), your computers can make a decision in a millisecond.
Earnings reports are for people from the horse and buggy age.
coach d,
Times have passed me by, I still have a flip phone. I went downhill skiing with the wife and daughter Saturday. It must have been the cold since their smart phones didn't work and my flip phone did. We'll see if my fundamental investing works or has been passed with the times. Futures are up quite a bit so you are right today.
Igy
Oil is up. Gold is down. Are we heading for another positive week? Did you buy on the dip?
gracias for the post, gente.
So not really an answer, if an answer is possible to the q of how much one time writedowns have affected GAAP earnings, but some clues.
Gente cites an article that says in Q3, earnings were down $40 blllion. But if you look at just 9 energy companies, you find $33 billion in unusual expenses, presumably writedowns.
Doesn't prove anything, but if we can identify just 9 companies that make up 82% of the earnings drop...I think we can assume that when the writedowns cease, earnings will pop.
So here's where the spikes hit the mondo - we're at post-correction highs in the SP500.
Is this is a dead cat bounce?
Was the correction just a temporary air pocket?
I can make the argument both ways - and since I have no conviction, I will stay long.
well to be more accurate we are at 2016 post correction highs - the 4Q 2015 correction highs were higher.
in that light, the August-Nov 2015 correction and the January-February 2016 corrections are looking very similar on a chart. Steep drop, partial recovery, back down to the lows, then a steep rise.
If we get back up to 2000 on the SPX the similarities will be even closer.
Churnings by the algos means nothing if the fundamentals are declining. Your hope lies in that earnings and investor risk appetite reappears.
Ghost of Igloi wrote:
Churnings by the algos means nothing if the fundamentals are declining. Your hope lies in that earnings and investor risk appetite reappears.
yeah
the more I read... the more I think that the big divide right now is really a debate about the power of the central banks.
if you think they are very powerful, you are generally bearish, seeing the 8 year rally as false and mostly manufactured by central banks.
if you think the central banks are just another piece of the puzzle, then you are more comfortable with the markets.
agip, Big, Muy loca, POTO, et al:
OK, off the GAAP and non-GAAP numbers. Lets just use the Wall Street standard of Operating Earnings for a little fact versus fantasy experiment. The high for Last Twelve Month (LTM) S&P 500 Operating Earnings was Quarter 3 2014 (09/30/2014) at $114.51 a share. LTM Q3 2015 Operating Earnings was $104.14, and LTM Q4 2015 with approximately 90% of the companies having reported is estimated to be $102.74.
Wall Street analyst have based their S&P 500 2016 price target on an average earnings of $120.16, and 2017 at $138.03. Seems like a stretch to me.
Igy