April 22, 2009
Posted: 1203 GMT
A Barometer of Earnings.
This week we have had a vast raft of earnings news from top U.S. corporations to digest. Tech companies like IBM and Apple, Internet giants like Yahoo!, banks ranging from Bank of America to American Express to name just a few.
Our task at Quest Means Business has been to make sense of it all... Hence the Q25.
We have carefully chosen 25 companies reporting this week which we believe in total, show the breadth and range of the U.S. economy.
We are giving the companies either a GREEN or a RED apple...and by the end of the week we will be able to guage the strength of the economies.
How do we decide who gets a GREEN or a RED?
Our starting point is whether or not the companies have MET or BEATEN consensus analyst expectations. But that is only the start.
Then we look at whether or not the numbers were met because of special one-off factors. We then move to look at whether there is any guidance for future quarters and what the outlook it. Finally, Maggie Lake and I, along with our producers have a good debate on it... arguing one side or the other until it usually becomes obvious!
A Public Heath Warning – The Q25 is not a scientific index – it is NOT weighted or calibrated. It is anecdotal and it often relies as much on "gut feeling" of those of us at Quest Means Business as the numbers themselves. You should take NO investment decisions on the strength of this.
Bank of America – On the face of it BOA should have got a green, since it made good money. But look behind the numbers and a different story is told; one-off tax gains and other special items massaged the numbers. And the bank had some worrying words on future bad loan provisions. Things are going to get worse. The consensus was BOA was a RED apple
Hasbro – The toymaker saw profits fall by 47 percent, that alone didn't merit a red - but the forecast that things were not getting better led us to give the company a RED Apple
Eli- Lilly – (This is a corrected version) Of course it was a Green apple for Eli Lilly for its better than expected results and sales growth. Most important of all, the guidance was strong
IBM – Big Blue made a profit, but missed its numbers, and failed to meet expectations. Heavily dependant on global trade, it's at the mercy of currency fluctuations at a time when capex is down, world trade is falling and it is still reeling from it's failed bid for Sun Microsystems; there was little doubt it was a RED Apple