I heartily endorse S&P's new earnings benchmark.
New costs included in earnings calculation, excluded by GAAP:
stock options granted to executives... - it probably includes all stock options granted, not just to executives. I've read this will hurt AMD earnings more than Intel's, but that may have been just a year 2000, 2001 thing when AMD's stock price soared relative to Intel's.
writedowns of depreciable assets... - these are included in GAAP earnings, but typically excluded from "pro forma" earnings. Unfortunately, this does NOT force companies to write down acquisitions or restore amortization of acquisitions to earnings. This will hurt Intel more than AMD. I am convinced that Intel has a pile of acquisition and fab-related writedowns they want to take as soon as they have decent earnings. When they do that, Intel's earnings statement may still read, "Pro forma earnings were 0.50 per share, excluding one-time writedowns of $0.40 per share." They can still say that, but S&P will calculate their PE based on less than 0.10 of earnings.
purchased research and development and pension costs... - I believe these are part of GAAP earnings, but, again, not included in "pro forma" earnings. It will have little effect on AMD. It wouldn't have affected Intel last quarter because they didn't purchase anything substantial.
Items to be excluded include gains and losses on asset sales, unrealized gains or losses from hedging activities... - This is as it should be. I hope S&P goes back a few years and restates the inflated earnings of many of the big cap tech stocks. If corporations stock portfolios ever skyrocket again, at least it won't be reported as earnings.
Items to be excluded include fees related to mergers and acquisitions and legal settlements
Not really sure why a fee a company pays to make an acquisition shouldn't be recorded as an expense, but neither one is very significant.
EDIT - QUESTION - Are the PE numbers published in newspapers based on GAAP earnings, Pro-forma earnings or S&P's definition? What about Yahoo and other internet sites?
Petz |
