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Revenues And Earnings: Another "Decoupling"

Tyler Durden's picture




 

As we approach 'peak earnings reporting' in the next two weeks, a quick glance at the state of the 65 companies of the S&P 500 that have reported so far may be useful. In yet another miracle of modern-day accounting, and just when you thought there was no more fat to cut, staff to lay-off, or Capex to cut, 73% of companies reporting have surprised positively on EPS while 65% have surprised negatively on Revenues. Industrials stand out in the liberal sprinkling of accounting fairy dust with 100% of the firms having missed top-line while 88% beat bottom-line. Is it any wonder that unemployment is rising once again and CapEx is falling?

65% Revenue misses versus 73% earnings beats...

 

The accounting fairies have been busy meeting and beating those expectations...

 

and the reaction - as expected - earnings beats have tended to outperform - but some beats have been sold (outlooks) - though at a sector level they have all risen (floated by the market)...

 

and revenue misses and beats are much more in line with performance over the two-dayts post announcement...

 

Charts: Bloomberg

 

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Wed, 07/18/2012 - 09:41 | 2627740 LawsofPhysics
LawsofPhysics's picture

Growth is dead, period.  We have reached the limits of our current technology and at the end of the day, labor is always the most expensive obligation to any company.  no suprise that "profits" can be boosted with a few layoffs.

Same as it ever was.

Wed, 07/18/2012 - 09:59 | 2627786 DeadFred
DeadFred's picture

Employees are so last millenium.

Wed, 07/18/2012 - 10:15 | 2627865 Mark Carney
Mark Carney's picture

Sooooo, in other words....

"ill just slide this number to this column, move this number over here...hmmm, this number 'never' happened...look Jamie, we beet EPS est."

-Thy accountant king

Wed, 07/18/2012 - 11:07 | 2628134 t0mmyBerg
t0mmyBerg's picture

It is simply amazing that the markets fail to discount this time and again.  This is the same game as ever.  I remember in the early 1990s my dad was GC of a fortune 50 company and this absolute yahoo was brought in as CFO to assist his absolute yahoo of a CEO in boosting earnings to game the stock higher.  My father was very concerned that they were cutting muscle and would pay for it 2-5 years later.  And of course they did.

Point is that it is so simple to look at bottom line but then see what is happening to the top line and go "Hmm, that doesnt look so good, maybe our model telling us the current value isnt telling us the right thing".  But no.  We still have unicorn earnings forecast in the very near future which as has been pointed out here on ZH is a hockey stick earnings forecast.  Umm, right.  Good for us though as it means the market is NOT efficient.  Unfortunately it also means my short S&P and other risk on contracts are costing me in the near term.  Good thing I was long a bunch of soybeans the last month or so.

Wed, 07/18/2012 - 09:43 | 2627742 adr
adr's picture

Your answer it that the EPS hurdle was actually buried ten feet below ground this time.

There was a chance the runner could trip with it laying on the ground.

Wed, 07/18/2012 - 09:44 | 2627748 Doubleguns
Doubleguns's picture

When they start getting $5 profit for every $5 of revenue things might become obvious. Until then its party on at the sheeples squat.

Wed, 07/18/2012 - 12:17 | 2628495 eclectic syncretist
eclectic syncretist's picture

The books will be cooked until someone gets into real trouble and the house of cards tumbles.

Wed, 07/18/2012 - 15:30 | 2629524 Jam Akin
Jam Akin's picture

The books will be cooked until all reserves and accruals are exhausted.  Then comes the troubling tumble.

Question is when will come this next opportunity for reloading the accruals? 

Cue soundtrack:  "And the beat goes on..."

Wed, 07/18/2012 - 09:46 | 2627754 nobusiness
nobusiness's picture

We don't need no stinking revenue.  We have the magical fed tour today.

Wed, 07/18/2012 - 09:50 | 2627762 Meesohaawnee
Meesohaawnee's picture

and another day of comical computer ramps.. why do we even call this the stock "market" anymore? earnings,data, nothing matters . And please. When the firsst of August comes around. Lets not make the big deal out of the employment report. Means nothing to. Look at the chart since the last "dreadful" report. Means zero!! Only thing that matters is what Ben put in the algos for the market to finish today. Wake me up when he lifts the short ban

Wed, 07/18/2012 - 10:06 | 2627810 DeadFred
DeadFred's picture

Extremely high short positions and vapor volumes are a deadly mix. Trend lind resistance for the S&P is about 1400. Long term this market is going down but the world is not going to end in the next 20 nanoseconds so it's party time

Wed, 07/18/2012 - 09:53 | 2627763 Problem Is
Problem Is's picture

"73% of companies reporting have surprised positively on EPS while 65% have surprised negatively on Revenues"

Wow... A perpetual motion machine that defies gravity... The Bernank will want one of these...

"The accounting fairies have been busy meeting and beating those expectations..."

Jamie & Lloyd, et al
Frauds and Scams are US Corporations only business model... As learned from the Worms of Wall Street...

Wed, 07/18/2012 - 09:55 | 2627775 Cognitive Dissonance
Cognitive Dissonance's picture

Don't forget the banks who are reporting wonderful profits, often by making generous reductions to their loan loss reserves.....which move right to the bottom line. 

Wasn't it B of A this morning who admitted that 56% of their 2nd quarter "profit" was from a reduction in their loan loss reserves? Didn't JPM make up over $2 Billion of the London Whale losses disappear from a loan loss reserve reduction?

They are still dancing folks. Be afraid. Be very afraid. 

Wed, 07/18/2012 - 10:21 | 2627894 DeadFred
DeadFred's picture

Syncora is up 117% this morning after BofA settled their suit yesterday. This is line with Tyler's MBIA analysis since they have very similar legal actions. Dropping reserves when they are faced with imminent settlements and a new exposure from LIBOR seems a bit lacking in wisdom.

Wed, 07/18/2012 - 10:07 | 2627804 yogibear
yogibear's picture

Why even care about honest bookkeeping. Nobody is prosecuted anymore. A controlled market and cooked books keeps things rolling. If you get in trouble the government has your back.

Just hollow-out your bank/financials to offshore accounts and come crying to the government for help.  If people ask where the money went just tell them it was spent. You have your rigged books to prove it.

With the government regulating agencies busy with porn and chasing hookers it's a great time to be a  financial criminal. 

 

Wed, 07/18/2012 - 10:18 | 2627881 Squid Vicious
Squid Vicious's picture

homebuilders rolling over after headline squeeze, mkt will follow shortly

Wed, 07/18/2012 - 10:42 | 2627993 Shizzmoney
Shizzmoney's picture

We have reached the limits of our current technology and at the end of the day, labor is always the most expensive obligation to any company.  no suprise that "profits" can be boosted with a few layoffs.

If I had a penny I've seen some company layoff workers, only to see their stock price rise $1-$2.

They say "corporations are just more efficient, and they do so by cutting the fat." 

Well, that works.....until mobs of people burning down their stores asunder.

 

Wed, 07/18/2012 - 10:56 | 2628068 LawsofPhysics
LawsofPhysics's picture

Hey, since the highest court in the land has confirmed that "corporations are people too", people can also be corporations.  Henceforth, I will be my own LLC and I shall have "limited liability" for the consequences of my actions for now on - "winning".

Wed, 07/18/2012 - 11:54 | 2628343 ReactionToClose...
ReactionToClosedMinds's picture

the creation of limited liability legal entity via the legal fiction of 'person' is well-established for a very long time.  Arguably it is one of the cornerstones of the phenomenal economic advance of the West ... more humans have been raised out of absolute desultory proverty in the last 200-250 years than in all of humanity's history .... yet a credit bubble pop many had seen coming for years (even the NYTimes editorial pages in the late 1990s complaining about the Clinton Admin HUD policies) ..... becomes a populist lynchmob mantra  

Certain companies can have free speech, ala the '1st Amendment' excepion for Washington Post and Kaplan Testing, NYTimes and it's broadcast outlets, GE and NBC, Comcast, etc, any media company ... they have free rein to 'influence' information favorable to their interests & beliefs ....... but any industrial or other business, like  Caterpillar has none?

Spare me the 'populist' outrage when you are being deceived by your propagandizing masters who have their own conflicts of interest 'no one' is permitted to adequately comment on .....  Go back to reading David Brock for 'relevant information ' .....

Wed, 07/18/2012 - 12:00 | 2628384 LawsofPhysics
LawsofPhysics's picture

Nice work, baffling them with bullshit, all the while ignoring the issue of real consequences for bad behavior.

Go fuck yourself.

Wed, 07/18/2012 - 11:42 | 2628281 ReactionToClose...
ReactionToClosedMinds's picture

again ... compliments to ZH for highlighting relevant information .

At what point does 'water extration' from a 'rock' come to an end?

Does ZIRP, debt monetization, curency rate management,  play a role ...... what chapters in the playbook?

 

Wed, 07/18/2012 - 20:51 | 2630323 chinaboy
chinaboy's picture

It flags a low quality of accounting standard.

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