July 29, 2015

Be wary of earnings being reported

As we move deeper into the earnings report season, please keep the following in mind: As a skeptic, I would compare the EPS season to Monty Python's "Twit Olympics," where contestants compete by jumping over matchbook covers.

In other words, investor relations departments manipulate consensus sell-side EPS forecasts so they can be beat by modest amounts, usually by a penny or so. This helps to explain why about 69% of reports are "beats" on a consistent basis.

The biz media is breathless about these reports, which are actually highly choreographed.

Among the dim-witted upper class depicted in Monty Python was Nigel "Incubator" Jones, whose best friend was a tree and who was a stockbroker in his spare time.

Remain skeptical of most earnings reports as they are judged against choreographed expectations.