Posts Tagged ‘Quarterly’

Do we focus on the long term?

March 17, 2014

We often hear CEOs complain about the short-termism of Wall Street, but a commentary by value investor Francois Ticart in this week’s Barron’s questions whether most companies really focus on long-term value. Let’s include investor relations in that question. Ticart, founder & chairman of Tocqueville Asset Management, says:

Listed companies, the analysts who follow them, and the executives who run them have become increasingly short-term minded in recent years. Stocks now routinely respond to whether they “beat” or “miss” quarterly consensus estimates of sales and earnings, and much of the stock trading takes place on that basis. Needless to say, quarterly earnings have very little to do with long-term strategies or other fundamental factors. By focusing on them, financial analysis has become nearly useless to long-term, fundamental investors.

So think about IR: We say we want long-term investors, but how much energy do we focus on quarterly results and short-term fluctuations, and how much effort do we devote to communicating strategic drivers of our business over a 3-year to 5-year time horizon like the one Ticart favors? Are our own IR efforts part of the problem?

© 2014 Johnson Strategic Communications Inc.

Advertisements

Winter weather, Super Bowls & other excuses

February 9, 2011

While shoveling snow this morning – yet again! – I was thinking about how quick the media are quick to hype the latest “blizzard” or “worst winter since the Ice Age.”

But should investor relations blame weather for missed earnings or a chill in sales? It’s not an easy question, but IR people (like the investors we serve) should at least ask skeptical questions when confronted with a claim that rain or hail or snow or dark of night kept the company from delivering earnings.

If you haven’t seen it, warm up your day with this entertaining video of Barry Ritholz discussing earnings excuses. Speaking on “Tech Ticker,” the economic commentator, investment strategist and keeper of the Big Picture blog excoriates “these pinhead PR guys” for foisting weather on investors as an excuse:

We’ve had God knows how many feet of snow, but IT’S JANUARY! And you know what? It snows in the north in the winter. … Look, if it was 120 degrees in January – hey, that’s why winter coats aren’t selling -that’s a legitimate issue. But snow and sleet and ice in January and February? This is not a surprise.

And in case you hear another seasonal excuse, Ritholz says don’t go there:

There was, I don’t remember which restaurant chain it was, that blamed a bad quarter last year because few people went out to dinner during the Super Bowl Sunday. And I said, ‘Did you not know the Super Bowl was coming? I think it’s scheduled for the next hundred years.’

Of course, icy weather may in fact keep consumers home for a time. Or delay our trucks from running. Or even shut down a plant or office. But let’s not be too quick to write or say weather is the reason for sales and earnings falling short.

CEOs, CFOs and, yes, IROs should apply the same disclosure disciplines to weather as to other factors affecting the business. In internal discussions we should probe a little deeper: Can we quantify how bad the weather was compared to last year? How many days did we lose? What exactly was the impact, and how can we back that up?

Being just a bit skeptical up-front may help us answer our investors’ questions.

© 2011 Johnson Strategic Communications Inc.

News affects stock price? You bet

February 25, 2010

We can all probably guess the least favorite news in the eyes of investors. Yes, it’s the earnings warning: Pre-announcing a disappointment in the numbers produces the most negative response in stock price, a new study shows.

The CXO Advisory blog, which reports daily on studies of investing theory and practice, provides a good summary of a February 2010 working paper by three finance professors who looked at the impact of 285,917 news releases from 2006 to 2009. Or you can access the original paper here.

Negative news hits stock prices harder, on average, than positive news helps, the study shows. And announcements of bad news also tend to be anticipated by stock price declines, suggesting the possibility of leaks.

The five most negative announcements for stock price impact? Pre-reporting bad financial results, FDA rejections of medical products, loss of a customer, poor financial performance on regular reporting dates, and product defects.

The five most positive? Pre-reporting better than expected financial results, share buybacks, FDA approvals of pharmaceuticals, spin-offs and EU pharma approvals.

During the financial crisis, context seemed to change the market’s reaction to news announcements: Issuances of debt or secondary equity offerings, for example, weren’t seen as such negative events during a time when weaker companies couldn’t access the capital markets.

The authors, who classify corporate announcements into nine major categories and 52 subcategories, believe regulatory changes such as Regulation FD in 2000 and Sarbanes-Oxley in 2002 have given news releases a more powerful impact on the market by encouraging an instantaneous, direct-to-shareholder communication mode. In fact, the professors observe:

Possibly as a result of the vagueness of the SEC’s information release requirements firms err on the side of disclosing too much information. Additionally, firms may prefer to release immaterial news in order to attract the attention of potential investors.

One possible use of this study for IR is to help gauge materiality of various kinds of events – the loss or gain of a major customer, for example – based on the average impact that similar events have had on companies’ stock prices.

© 2010 Johnson Strategic Communications Inc.

Happy 2010!

January 1, 2010

Just about everyone is happy to see 2009 fading into history and brighter prospects dawning with the new year. I share the enthusiasm for a new start, not to mention more favorable year-over-year comparisons. And I wish you personally a healthy and prosperous 2010.

The first question we confront, as communicators who will often cite the year in presentations and conversations, is how to say it – 2010, that is. People have been chattering on Twitter and other forums about whether “two thousand ten” or “twenty ten” is the way to pronounce 2010. I’ll put my vote in for “twenty ten.”

This view finds support from a New Year’s Day column in the San Francisco Chronicle, which cites a grammar zealot who “cringes” at  hearing two thousand ten after a century of nineteen such-and-such. Then, more moderately, a linguist:

“It’s not wrong to say ‘two thousand ten,’ ” [noted UC Berkeley linguistics Professor George] Lakoff said. “And it’s not like ‘twenty ten’ is the right way.” … Nevertheless, Lakoff predicted, ” ‘Twenty-ten’ is gonna take over. It’s shortest. It’s easiest to understand.”

And there’s something to be said for short. Maybe you don’t care, but if you’ve been wondering, there it is: Twenty-ten has arrived.

I hope your new year is a good one!

© 2010 Johnson Strategic Communications Inc.

Earnings giggle

August 10, 2009

For a bit of comic relief check out “Mad Lib Earnings,” an all-too-true parody of earnings releases and the obligatory wire service stories that cover them. It’s Stanley Bing’s column on the last page of the August 17, 2009, Fortune magazine.

Bing’s fill-in-the-blanks earnings release makes our job easy. There’s a boilerplate quote from the CEO complete with an overwrought metaphor:

“These are tough times,” said Bob Boberts, chief executive officer of Big Fat Company. “Tough times call for tender chickens, and ours are the juiciest in what is, right now, a lean and stringy sector.”

We can choose between reporting a decline or “sad little incline” in second-quarter revenue. There’s a nod to cost cutting in “the elimination of nondairy creamer in offices nationwide.” Some optimistic-without-saying-much words from the COO.

And a wire service story, appearing five seconds after the release, offers jewels like:

“Results, schmesults,” said a quote monkey from an investment bank who’s always available to validate assumptions. “We’re going to downgrade them anyhow …”

I think we  know that sell side analyst who always take the reporters’ calls. And as a former newspaperman, I can enjoy the satire on journalism’s craft – we used to call quickie news stories with instant analysis “three phone calls and a cloud of dust.”

So there you have it. Investor relations and the financial news media continue getting the word out, for better or worse. We need a chuckle now and then.