DJ TALES OF THE TAPE:Warnings Season Spawns Cranky Analysts
12 Apr 08:15
By Lynn Cowan
Of DOW JONES NEWSWIRES
(This report was published originally Wednesday)
WASHINGTON (Dow Jones)--A record number of corporate earnings warnings are
making Wall Street analysts' workdays seem like a never-ending episode of ER -
minus the romance.
"Relationships? What is that? I don't know what you're talking about," says
J.P. Morgan H&Q wireless industry analyst Ed Snyder, joking about how his job
affects his personal life. "Are you speaking French?"
Snyder and his fellow sufferers in Wall Street's research departments are
slogging through the highest number of earnings preannouncements ever. There
have been more than 1,100 since January, with the majority crammed into the
past three weeks, according to Thomson Financial/First Call.
Technology analysts are facing double the number of preannouncements they
encountered in the fourth quarter of 2000. About 70% of the news is negative -
also an all-time high.
Some analysts say their sleep quotient has an inverse relationship to the
rise in preannouncements, with consensus expectations of about four hours a
night, down from 6.5. But that's just the price of the profession, as all
concede they entered the business expecting to sacrifice shut-eye for their
careers. However, the level of stress and dearth of personal time does put some
strain on their lives.
"It's pretty hard raising two young boys in this quarter now," says Jim
Jungjohann, a telecommunications equipment analyst at CIBC World Markets Corp.
"It's definitely been taxing in terms of my family."
Given the new job demands, Snyder is glad he's single. He can devote all his
waking hours to his job, which he believes gives him a competitive edge.
"I don't know how they do it," he says of analysts with children.
But beyond missed bedtime stories or ball games, Wall Street prognosticators
are dogged by the nagging, never-endingfeeling that the next phone call,
e-mail or news flash will deliver another body blow for the companies they
cover.
"I feel pretty much like I'm on call all the time," says Tom Lauria, an
optical fiber analyst at ING Barings LLC. His day lately has extended into the
night when the companies he covers, like Nortel Networks Corp. (NT), unleash
warnings after the market closes.
Lauria, who left his old job as investor relations director at Lucent
Technologies Inc. (LU) in May, has only seen the hairy side of the market since
he joined. He says the increase in preannouncements means his plans can change
at any moment. Business travel arrangements and meetings can be pre-empted by a
late warning.
Mornings aren't much better. "It's so unpredictable, you just expect bad news
when you walk in in the morning. You'd be surprised by good news," he says.
Analysts say the economic environment and a new Securities and Exchange
Commission regulation appear to conspire to wreak havoc on their lives. A
slowing economy and uncertain market conditions are making it hard for
corporations to predict sales from week to week. And SEC Regulation FD requires
companies to publicly release market-moving news in a timely manner.
That combination has led to repeated revisions by companies and analysts
alike. At least 20 major corporations, including JDS Uniphase Corp. (JDSU) and
Vitesse Semiconductor Corp. (VTSS), have issued multiple earnings warnings this
season.
It seems like the entire first quarter was just one long warnings period -
commonly known as confession season on Wall Street - because the total volume
of bad news increased so much. Such bad news is running about 43% ahead of the
fourth quarter's record high, says Chuck Hill, research director at First Call.
On a percentage basis, it's still following a predictable pattern of flooding
the market in the final two weeks of the quarter and the first two weeks after
it closes, he says.
The unpredictabilityalso makes it harder to do pro-active, in-depth
research. Lauria likes to stay ahead of new product developments but finds
himself pouring over financial statements instead. Snyder says carefully
planned research interviews get scrapped at the last minute so he can jump on
the latest warning victim's conference call, phone clients and issue research.
ABN Amro Inc. Internet analyst Arthur Newman says his business trips have
become more harried. He obsessively checks for news on the companies he covers,
always dreading the result.
"I've become quite good at downloading my e-mail at airports," Newman says.
There's one bittersweet market change research departments can rejoice in.
The unpredictable environment spawns fewer investment banking deals, a side of
the business that also makes demands on analysts' time. When most corporate
earnings are in later this month, analysts will be free to lavish attention on
their firms' large trading clients because there isn't likely to be any
potential investment banking clients to schmooze.
"Your ultimate customers as an analyst are brokerage accounts," says Snyder.
"If you don't have a good relationship with the buy side, you're not doing your
job."
-By Lynn Cowan, Dow Jones Newswires; 202-628-9783; lynn.cowan@dowjones.com
(END) DOW JONES NEWS 04-12-01
08:15 AM |
