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Tag >> analysts
Jul 22

The art and science of missing analysts' expectations

Posted by nicklord in Reg FDMcKinseyanalysts


Much of what a CFO does can rightly be described as science: numbers, spreadsheets and reports all live in the empirical, analytical realm of cold, hard facts. While much of accounting does involve making assumptions, there is one part of the CFO's job description that might more accurately be described as art than science. 

Managing analysts' expectations is about color, texture, and the chiaroscuro of suggestion, mandated, of course by the rules that govern fair dealing and access to information. Yet research released recently by McKinsey shows that over the past 25 years, analysts' expectations have been consistently over optimistic, especially when it comes to earnings forecasts.

Apr 22

Consumer companies still show weakness

Posted by mcole in economyearningsconsumer spendingCashanalysts


A slew of companies posted disappointing quarterly results this week with reasons as varied as the weather, raw material costs or simply a lack of growth. The companies have one thing in common, though: They all rely on consumer spending.

Kimberly-Clark, the maker of Kleenex and Huggies diapers, earned $384 million in the first quarter, down from $407 million a year ago, due to higher costs for raw materials, especially pulp and and oil-based materials.

Nov 04

The redemption of Dick Bove?

Posted by MQuinn in researchBankingbank failuresanalysts


In July 2008, bank analyst Dick Bove published a research note highlighting two ratios he believed might indicate a bank was in danger.

The first ratio divided non-performing assets by outstanding loans.  He considered a ratio over 5 percent to be dangerous. The second ratio divided non-performing assets by common equity plus reserves.  Anything over 40 percent was deemed perilous.

In the note, he listed the 20 banks with the worst ratios in each category as calculated on July 14.

By doing so, he got himself sued by BankAtlantic Bancorp, which was one of the worst performers in both categories, and investigated by the Financial Industry Regulatory Authority. Bove says the lawsuit, which accused him of defamation and negligence, has cost him $50,000 a month in legal fees. It also prompted him to leave his then employer Ladenburg Thalmann Financial Services to join Rochdale Securities. Finra informed Bove this week it had concluded its investigation and was not recommending any action against him.

On Wednesday, the analyst thought it was a good time to look back and see how good of a gauge those ratios were.

Turns out, not bad.

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