The Latest Numbers Are Out - and Our Eyes Glaze Over

Every executive on the planet — except those on Wall Street — already knew it. But now it’s official: quarterly earnings reports are completely “meaningless.” They are nothing more than a “fool’s game” played by corporate managers to “please Wall Street, their shareholders, and all of the bloggers and talking heads on cable TV.”

So decreed U.S. Chamber of Commerce president Tom Donahue yesterday, and we can only assume that he was speaking on behalf of the three million CEOs that his organization represents. We can also assume that those executives have saved a few dunce caps for the folks at the Washington Post, which reported Donahue’s speech and then placed the article on the Post Web site — just above five excruciatingly dull and utterly irrelevant stories about various corporations’ quarterly earnings reports.

The entire exercise raises the question: Who reads these things, which are posted on news Web sites or printed in newspapers long after they’ve been released by tickers (Bloomberg, Reuters, Dow Jones) or by companies themselves? Certainly not most executives, who recognize that except in the most extreme of cases, short-term numbers say nothing about a company’s long-term health. And certainly not day traders or other short-term market gamblers, who have already digested the data. We would be surprised if editors themselves read these stories, sounding as they do like verbatim regurgitations of corporate press releases.

Yet, they’re here again, as consistent as locusts — the ridiculous “latest number” stories that infest the business pages and devour reporters’ time for several weeks each and every quarter. Today alone, the Wall Street Journal treats us to no less than five of these snoozers.

Among them is a 430-word treatise (subscription required) informing us that Bombardier Inc. (FYI: it makes jets) reported losses of $9 million last quarter. In addition, several inches of front page column space is used to report that auto manufacturers sold fewer cars last quarter and personal income, “driven” by climbing wages and hurricane insurance payments, soared all of .4 percent. We also get a 570-word article (subscription again) about last quarter’s GDP growth, which was 4.3 percent — presumably more than before, though by how much the Journal doesn’t say.

As for Bombardier, the U.S. economy, or Ford Motors, we have no idea whether they are actually healthy or sick. Not after reading today’s Journal, anyway.

Now, we do know from talking to our friends at Dow Jones, the owner of the Journal, that the company spends a large chunk of its own quarterly earnings on market researchers. So at least it cares about its customers. But we wonder: By what process do these people conclude that the Journal’s sophisticated readership wants to be bombarded with snapshot numbers taken out of context and presented in isolation of the important big-picture stories about corporate strategies or government economic policies?

Where are the answers to the questions that really matter? What, for example, are these companies doing with their quarterly earnings? Are they reinvesting them wisely? Are they cutting corners to boost short-term profit numbers? If so, what’s happening to their products and brands as a result? Are the people who run these companies competent? What is their vision?

And, hey, why are we asking all these questions? Isn’t that what editors are for?

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Mark R. Mitchell wrote the The Audit column in 2006.