From CBS Marketwatch today:
Analyst: claims on Mirant are false
By CBS.MarketWatch.com
Last Update: 4:23 PM ET Jan. 28, 2002
ATLANTA (CBS.MW) - Reports that Mirant's 2001 earnings are inflated by energy management activities are "clearly unfounded," Williams Capital analyst Christopher Ellinghaus said Monday.
A press report insinuated that Mirant's (MIR: news, chart, profile) 2001 financial results may have been overstated by "aggressive non-cash, mark-to-market accounting treatment related to energy trading," Ellinghaus said in a research note issued early Monday.
The analyst didn't specify the source of the article, but said it suggested that current energy marketing earnings are unsustainable relative to the amount of equity invested in that business.
The claims of "Enron-esque accounting" are "spurious," Ellinghaus said, pointing toward Mirant's third-quarter, year-to-date mark-to-market earnings, or earnings related to energy management activities, which shows a non-cash adjustment to year-to-date 2001 reported income of $23 million.
Net income through the first nine months of the year was $538 million, he said, so the 4.3 percent of net income that is represented by non-cash mark-to-market gains is "well within a reasonable tolerance."
"We see no cause for concern related to Mirant's disclosure of earnings from trading and marketing, no unusual returns on equity exist and we see little comparison to Enron's problems whatsoever," Ellinghaus said.
marketwatch.com
So, we're down from the twenties because people are concerned about 4.3% of net income that's from non-cash mark-to-market gains? Give me a break!
Forget the fact that FASB makes the rules. I'd bet that, once you consider the fact that >80% of MIR's derivatives are trades of power they produce in their own plants, the supposed risks of "mark-to-market" profits not actually being realized are almost nil.
Is a farmer who sells his corn crop in a forward sale really at risk in his "derivative" position? Only if he can't deliver.
It'd be nice, though, if analysts would make some stronger statements than "well within a reasonable tolerance."
How 'bout something along the lines of "this sell-off is completely irrational - MIR should be a $30 stock and we are buying the hell out of it."
Bob |
