The gaming of our economic system and statistics is not the sole province of the government. Corporations have mastered the art as well.
Naturally, this is not much of a surprise, because with the government setting the tone for providing perpetually “better than expected” economic statistics, it stands to follow that corporations and Wall Street will gladly follow along.
Here are two separate examples from today to illustrate how the game is played. The game, for any new readers here, involves Wall Street analysts providing super-lowball estimates of earnings that a company can easily beat, and then trumpeting that result while conveniently glossing over the sordid details involving any worse-than-expected revenue shortfalls or accounting tricks used by the company to boost their earnings.
The first concerns the giant retailer Target (TGT), which announced their quarterly earnings this morning:
Target Second-Quarter Profit Tops Analysts’ Estimates (Correct)
Aug. 18 (Bloomberg) — Target Corp., the second-largest U.S. discount retailer, reported second-quarter profit that fell less than analysts estimated. The shares rose in early U.S. trading.
Net income declined to $594 million, or 79 cents a share, from $634 million, or 82 cents a share, a year earlier, Minneapolis-based Target said today in a Business Wire statement. Analysts estimated profit excluding some items of 66 cents, the average in a Bloomberg survey. The retailer said July 9 it would meet or exceed a median estimate of 64 cents.
by cmartenson