. I believe if you use the major “analyst” earnings/ target reporting services (First Call, Zacks) you will find that their (and the “analysts”) estimates are based on pro forma (recurring operations) and exclude non-recurring gains/losses.
I believe you are right that Zacks and First Call give forward earnings estimates based on estimated pro forma earnings. However, there is a huge problem these days in accepting the idea that most companies’ reported pro forma earnings equate to "recurring operations" as you do, and a big problem in accepting the notion that pro forma earnings exclude non-recurring gains/losses. In recent years, many companies have taken extreme liberties in their reporting of pro forma earnings, which unlike GAAP earnings or Standard Poor Core Earnings, lack any standards. Usually companies simply manipulate the numbers to make themselves look good, hopefully pump up the stock price and allow the insiders to cash out their stock options. Pro forma numbers don’t go into the SEC filings and they don’t have to meet any standards. Supposed "one time" charges such as inventory write downs and restructuring charges are excluded by many companies on a recurring basis. Investment gains are often considered to be part of business operations and included while investment losses are considered one time. As I recall, and as I have posted on this thread, Qualcomm had this very problem a couple of years ago with excluding investment losses, Globalstar I believe, but including investment gains from some of their other technology investments. I remember this problem with QCOM (and other companies) was covered in an essay at the Motley Fool.
I hear QCOM has made their pro forma reporting much more useful in the last year or two, but they still don’t include stock options expense in their reporting, and that is an important business expense at Qualcomm that shouldn’t be overlooked in my opinion.
Best, Huey |
