SAG - regarding your line :
<Growing earnings at a faster clip than revenues, of course, is unsustainable.>
Yes, yes, yes. And, this is exactly my (and at least a few other peoples') complaint about Coca Cola (and Gillette).
To add even more "oomph" to this line of analysis -- I read an article in Forbes magazine (sorry, I do not have the date handy, but it is in a pile somewhere in here, and I can find it if I have to) talking about current accounting standards about recognizing profits and losses from derivatives positions.
Basically, if you are an innovative (sneaky? dishonest? Wall Street analyst pleasing?) management, then it is okay with everyone if you use derivatives the same way people (years ago) used endlessly rolling silver futures spreads to manufacture pretty much any earnings figure (at least, until the derivatives are ultimately un-wound).
So, something I personally have always thought -- that is a lot easier to "fake" earnings than it is to fake revenues -- is apparently true. Yet, one never hears the so-called "analysts" on Wall Street worrying about why KO and G are both near zero growth on revenues, despite those "great" earnings.
End of rant.
Jon. |
