[leslie]

I get sooo pissed by the media coverage of earnings and EPS. They have ALL stopped using the reported accounting EPS and moved to the 'earnings before the bad stuff' that was prevalent in the tech bubble.

The line being repeated right now is "the earnings are good, but of poor quality because there is no revenue growth, just cost cutting". Please look for yourself at the numbers S&P publishes on this spreadsheet (Sheet1). You will see something quite different.
http://www2.standardandpoors.com/spf/xls/index/SP500EPSEST.XLS

When I looked 197 companies had reported. By totaling the columns and finding the percent difference from last year you get (not value weighted):

Percent change in revenues.........................10 % down
Percent change in reported earnings .............30 % down
Percent change in earnings before bad stuff ...18 % down

Earnings before the bad stuff is still 96 % higher than reported earnings. Historical average is 16 % higher.

From Sheet2 you can annualize the quarterly reported earnings ($7.27*4quarters=$29.08)
and compare to the index value at quarter end ($919.32) to get a rough
P/E = 29

 

[stephenheath]

That's a good point, although I personally haven't seen too many reports that haven't shown the top and bottom lines at the same time. I was curious how prevelant significant differences were, so I threw in a column and worked out the differences individually. I based my percentage on the absolute value of the difference between the two EPS's for the current year divided by the bottom line EPS, then sorted it in ascending order. Of the 197 companies, 132 are 16% or less, and 161 are 32% or less. It quickly escalates up from there though, with 8 companies at the bottom being over 200%, and Cintas being the worst at 1167% (Operating EPS 38 cents, Bottom Line EPS 3 cents). Overall it would seem to me that a good chunk of the market is still playing by the rules, but a lot of companies are doing "extraordinary" things.

While that doesn't necessarily mean those are bad companies... I've known lots of companies to take advantage of a down year to lower all their estimates and take a big bath... it sure shows that the "soundbite EPS reporting" you're talking about doesn't really help investors.

 

[mogul777]

All this bs does is create and feed volatility which in turn makes the fat cats richer and leaves the "average investor" in a perpetual state of underperformance. Just another way to legally manipulate the markets for personal gain.

 

[leslie]

source market-ticker.org