Earnings estimates and footnotes
Q: Where can I find Wall Street’s earnings estimates for various companies’ upcoming quarterly reports?
A: You can find projected earnings at a variety of online sites, such as finance.yahoo.com. (Enter a company’s ticker symbol there, and then click on “Analysts” on the next page.)
Don’t pay too much attention to those numbers, though. For one thing, they’re just guesses, though they’re often based on information and guidance from the company itself. Think about that, too — if a company reports earnings that exceed the analyst estimates that it helped shape, is that really impressive? Many companies might just lowball their projections in order to look good when posting results.
The analyst reports that your brokerage might offer can be far more informative, offering insights into a company’s health and competitive position as well as the challenges facing its industry. Don’t give too much weight to ratings such as “strong buy” or “outperform.” Analysts issue very few “sell” ratings, and they’re not known for accuracy.
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Q: Is it OK to skip the footnotes when reading a company’s filings?
A: It’s better to review the footnotes. Footnotes can be revealing, such as outlandish executive perks (personal use of company jets, generous severance packages and so on).
You’ll also find the accounting methods the company uses when preparing the financial reports it publishes and specific interest rates that the company is paying on its debt. You might not worry as much about a 3 percent obligation, versus an 8 percent one.
Dear Fool: My dumbest investment was buying into action camera company GoPro in mid-2015 at $58 per share — and then adding some more shares later in the year at $18, hoping for a post-holiday gain. My average cost is $42 per share, and the stock is now trading below $9. Why am I holding? Because it’s so bad, I don’t even know if it’s worth salvaging what’s left. I’ll hold for a while, and if things don’t look any better, I’ll sell and lick my wounds.
The Fool responds: If a stock holding is making you hold your nose and you don’t have high hopes for it, you’re better off selling. Yes, you’ll likely lose money, but remember that falling stocks can fall further, so you might be avoiding additional losses. Also, whatever money is left, even if it’s relatively little, can be redeployed into a stock in which you do have a lot of confidence. Come tax time, you may be able to use that loss to offset a gain, thereby shrinking your tax bill.
GoPro has had a tough time, facing competition while burning cash and posting losses. However, it has reported some stronger numbers lately; its video-editing app, Quik, is getting good reviews; and bullish investors are hopeful about its HERO6 and Fusion cameras and its Karma drone. (The Motley Fool owns shares of and has recommended GoPro.)
The Walt Disney Co. (NYSE: DIS) has entered a period of massive change, but it’s likely to come out the other side in better shape than it’s currently in.
Sales have been flat over the past few quarters, and many worry about Disney’s long-term health because of the spread of cord-cutting, where consumers drop cable TV service for streaming alternatives. That’s bad for Disney’s ESPN, which charges cable networks more than any other channel to carry it — but Disney has responded with plans to start two streaming services, one focused on sports, and the other on family, Marvel, Pixar and “Star Wars” content. Disney has an unequaled treasure trove of content it can mine.
Much of Disney’s business remains strong. Its parks and resorts, for example, could easily set another earnings record in fiscal 2018 as Disney’s Shanghai resort starts kicking in significant profits. In 2019, Disney also has theme-park expansions planned to open both in California and Florida based on “Star Wars.” Those openings, plus some improvements at Florida’s EPCOT and Toy Story Land opening at Disney Hollywood Studios, should drive much traffic.
The media giant’s pipeline of movie releases is stacked, too. There are several pictures on the way from Marvel studios next year and many more releases under the Pixar, Disney and Disney Animation brands. (The Motley Fool owns shares of and has recommended Disney.)