The Business Press Maven is trying to wrap his head around this one:
missed expectations, and yet it didn't. Or, rather, the company missed one set of expectations (the one you can see) but, uh, surpassed another set (the one you can't). Or something like that.
The confusion, I believe, stems from the business media's need to attach a meaningful-sounding explanation to a blip in Yahoo!'s stock price, a thinly traded after-hours bounce after the company reported post-market close Tuesday.
They Just Don't Get Yahoo!
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Take a look at this
headline, for example:
The article's second sentence gets right to work telling this tale of two expectations:
"While the results released Tuesday missed analyst expectations, the performance wasn't as bad as many investors feared after Internet search and advertising leader Google Inc. disappointed Wall Street with its second-quarter earnings last week."
Whenever the business media try to force a story line, the first quote they generally use involves a strained metaphor, and here were had a little ditty about tasteless crackers:
"'They did better than the worst expectations,' said Canaccord Adams analyst Colin Gillis. 'It was a "rice-cracker" quarter. It didn't taste great, but it wasn't totally horrible either.'"
As someone who uses both words and numbers, I've grown to distrust the first unless they're backed up by the second. What did this quote even mean?
Wall Street, investors and the business media normally use the average of analyst expectations as a measure for expectations. Sure, the consensus estimate is flawed in multiple ways, but at least it cuts out the outliers -- the worst and best at the far end of the spectrum.
So did Yahoo! mysteriously react to the very worst of the expectations? Or are we talking two sets here ... all to explain an after-market move that amounts to not much more than a rounding error?
Here's what the article told us numerically in terms of actual expectations:
"The Sunnyvale, Calif.-based company earned $131 million, or 9 cents per share, from April through June. That was down 18 percent from $161 million, or 11 cents per share, at the same time last year... Analysts had projected earnings of 11 cents per share in the most recent quarter, according to Thomson Financial."
Pretty straightforward, right? And here's what the article told us numerically in terms of the shadow expectations highlighted in the headline and second sentence: Nothing. We had no numbers. In fact, beyond the cracker metaphor, we didn't even have verbal or written proof for this showcased claim that Yahoo! outperformed a secret society of expectations.
Is it possible that an entire band of traders and investors has a second set of expectations, above and beyond (or, in the case, below and beyond) Wall Street analysts? I guess. But when The Business Press Maven sees no proof beyond crackers, it seems more likely that journalists are just looking to explain a small, after-market price move. That stock move, however, could just be chalked up to macro news or even Yahoo! saying some positive things about forward revenue -- that's far different from a secret set of expectations.
At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.
Marek Fuchs was a stockbroker for Shearson Lehman Brothers and a money manager before becoming a journalist who wrote The New York Times' "County Lines" column for six years. He also did back-up beat coverage of The New York Knicks for the paper's Sports section for two seasons and covered other professional and collegiate sports. He has contributed frequently to many of the Times' other sections, including National, Metro, Escapes, Style, Real Estate, Arts & Leisure, Travel, Money & Business, Circuits and the Op-Ed Page. For his "Business Press Maven? column on how business and finance are covered by the media, Fuchs was named best business journalist critic in the nation by the Talking Biz website at The University of North Carolina School of Journalism and Mass Communication. Fuchs is a frequent speaker on the business media, in venues ranging from National Public Radio to the annual conference of the Society of American Business Editors and Writers. Fuchs appreciates your feedback;
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