OT(?) IBM Earnings.
cribbed from Yahoo! AAPL
RodgerRafter
Jul 20 1998
6:19PM EDT
>IBM beat First Call estimates by a penny after the close
today, and beat the Zach's average by 3 cents. I suppose the
market will think this is good news and rally somewhat
tomorrow. For that I am grateful.
EPS for the quarter was $1.50, up from $1.43 in 2Q '97 and
about 1.06 last quarter. However, revenues were down 0.3%.
Net earnings were only up 0.4%, despite the second sentence
in their report "Second-quarter 1998 net earnings totaled
$1.5 billion compared with $1.4 billion in the second
quarter of last year."
That statement gives me a great deal of amusement. They
rounded $1.452 billion up to $1.5 for Q1, and $1.446 billion
down to $1.4, thus making a $6 million dollar increase sound
like a $100 million dollar increase.
So how did they beat the estimates? They bought back $1.7
Billion dollars worth of stock last quarter, causing net
shares outstanding to decrease. This allowed flat earnings
to go farther for each share, creating an illusion of
earnings growth, at the expense of equity, which has dropped
$1.24 Billion over the last two quarters. Nevertheless,
analysts love to see stock buybacks and EPS growth. They
don't give a damn about book value.
Fortunately, Apple has much more long term sense than IBM.
What would have happened if Apple had taken their $101
million in earnings last quarter and bought back stock?
Well, given the extremely high short interest, and tight
supply of stock, it probably would have caused a significant
rise in the share price. They'd have paid about an average
of about $34 per share for about 3 million shares. EPS then
would have been boosted by about about 2% (who needs that
when you are already beating estimates by 50%).
Fortunately Apple doesn't need to sacrifice long term growth
to create the illusion of short term gains in EPS or a rise
in stock price. Perhaps this is because our CEO doesn't own
any stock?
Go AAPL. (in the long run)
Rodg.< |
