Comments on: The art of earnings reports http://blogs.reuters.com/felix-salmon/2012/08/13/the-art-of-earnings-reports/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: QCIC http://blogs.reuters.com/felix-salmon/2012/08/13/the-art-of-earnings-reports/comment-page-1/#comment-42619 Tue, 14 Aug 2012 17:32:29 +0000 http://blogs.reuters.com/felix-salmon/?p=17104#comment-42619 I used to work on the earnings reports of companies like 3M. They are mostly a joke and tortured beyond much correlation with the truth. Multi-page sections which could be summarized by the sentence “if we sell less stuff next year we will make less money, and likely we will sell less stuff”. A desperate desire to obscure obscure obscure.

Just invest in some index funds and leave the earnings report to the full-time professionals and the suckers (the overlap of which is quite extensive).

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By: TinyTim1 http://blogs.reuters.com/felix-salmon/2012/08/13/the-art-of-earnings-reports/comment-page-1/#comment-42610 Tue, 14 Aug 2012 10:24:36 +0000 http://blogs.reuters.com/felix-salmon/?p=17104#comment-42610 Felix – perhaps the real truth is that understanding what really matters in an earnings report is hard and can’t be done by newswire journalists who are only capable of reading one number (net income).

I used to think you had a pretty deep understanding of the markets but this entire post makes me wonder.
For example, “the reaction of the share price to the earnings statement, unless it’s huge, generally tells you almost nothing about the substance of that statement”.

This could not be more wrong.

You just don’t know what the substance is.
Just because you are ignorant, it doesn’t mean that smart money is.

Of the hundreds of calls I have covered (on companies I know) I can’t explain the stock move in perhaps 5% of them.
And those tend to be the real money makers!

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By: billyjoerob http://blogs.reuters.com/felix-salmon/2012/08/13/the-art-of-earnings-reports/comment-page-1/#comment-42606 Tue, 14 Aug 2012 00:21:09 +0000 http://blogs.reuters.com/felix-salmon/?p=17104#comment-42606 “Orthogonal” is like the secret handshake of posers worldwide. And kicking an old man in the shins and calling him gramps is really lame. Sammon needs another wedgie.

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By: TFF http://blogs.reuters.com/felix-salmon/2012/08/13/the-art-of-earnings-reports/comment-page-1/#comment-42604 Mon, 13 Aug 2012 23:36:31 +0000 http://blogs.reuters.com/felix-salmon/?p=17104#comment-42604 Not sure what you are trying to say, Felix, and the comparison of Dell and Amazon leaves me scratching my head. (For the record, I wouldn’t consider investing in either one at this time.)

I do agree that net income is less useful than the outlook, and even less useful than the details on business dynamics.

As for the popular consumption articles, I’m most interesting in reading that “XYZ has fallen 20% on weak revenues”. Sometimes (as with Nike a month ago), that is an overreaction.

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By: Beer_numbers http://blogs.reuters.com/felix-salmon/2012/08/13/the-art-of-earnings-reports/comment-page-1/#comment-42600 Mon, 13 Aug 2012 19:59:15 +0000 http://blogs.reuters.com/felix-salmon/?p=17104#comment-42600 A lot of odd stuff going on here. This seems goofy:
“a large net profit is in many ways a sign that the company in question has reached the limit of what it can do, and has no real ability to reinvest capital or to boost future growth.”

What does profitability have to do with reinvestment opportunities? It sounds more like you’re talking about cash levels and shareholder distributions, which are fairly unrelated to profitability in terms of reflecting available opportunities. Are you asserting that the most profitable companies in the world are the ones with the *least* future growth available to them?

Seriously, there are all kind of random statements here that I don’t think have any basis in fact. What does it mean to be all about “short-term tactical positioning”?

And how do you propose that “much of the smart money is doing all manner of highly-complex trading in the options market rather than the cash market”, without those option price movements spilling over into the equity markets?

There’s a fairly rich body of research in finance/accounting/economics looking at market response to earnings announcements and, not surprisingly, the market response tends to be highly correlated with the earnings surprise. Not because of some short-term tactical positioning story, but because investors are bayesian and update their beliefs about future cash flows based when they get new information.

This post is just filled with unsupported assertions that are either nonsensical or don’t ring true.

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By: Beer_numbers http://blogs.reuters.com/felix-salmon/2012/08/13/the-art-of-earnings-reports/comment-page-1/#comment-42597 Mon, 13 Aug 2012 19:51:51 +0000 http://blogs.reuters.com/felix-salmon/?p=17104#comment-42597 This is absolute crazy town:
“a large net profit is in many ways a sign that the company in question has reached the limit of what it can do, and has no real ability to reinvest capital or to boost future growth.”

What does profitability have to do with reinvestment opportunities? It sounds more like you’re talking about cash levels and shareholder distributions, which are fairly unrelated to profitability in terms of reflecting available opportunities. Are you asserting that the most profitable companies in the world are the ones with the *least* future growth available to them?

Seriously, there are all kind of random statements here that I don’t think have any basis in fact. What does it mean to be all about “short-term tactical positioning”?

And how do you propose that “much of the smart money is doing all manner of highly-complex trading in the options market rather than the cash market”, without those option price movements spilling over into the equity markets?

There’s a fairly rich body of research in finance/accounting/economics looking at market response to earnings announcements and, not surprisingly, the market response tends to be highly correlated with the earnings surprise. Not because of some short-term tactical positioning story, but because investors are bayesian and update their beliefs about future cash flows based when they get new information.

This post is just filled with unsupported assertions that are either nonsensical or don’t ring true.

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