Tuesday, March 29, 2016

Using the Calcbench Earnings Indicator on our homepage (bottom right hand side), we monitor and display a few common financial metrics and compare the data to the year ago quarter as it comes in. We had been struck by the relative collapse in Net Income versus the year ago period. As of the 4600+ filings that had come in by March 28, 2016, Net Income was down over 30% year over year (comparing 4th quarter 2015 to 4th quarter 2014).

Our first thought was that there must be a data issue. With revenues down, and operating expenses up only slightly, there must be a mistake. Right?

Uh… NO. That is an unequivocal NO.

Let’s line up the data and show you what we found.

We call this exercise ‘Calcbenching the dots’

When you take out financial services firms, the picture gets worse!

So that got us to ask, which are the top 5 Industries with the biggest Net Income drops? And how much have they lost year over year? The table below has the data.

Industry NetIncome ($ Billion) PRIOR YEAR NetIncome ($ Billion) Dollars Lost ($ Billion)
CRUDE PETROLEUM & NATURAL GAS -$61,635 -$,6059 -$55,576
PETROLEUM REFINING -$2,642 $12,258 -14,900
NATURAL GAS TRANSMISSION -$2,863 $2,964 -$5,828
OIL & GAS FIELD MACHINERY & EQUIPMENT -$4,122 $1,413 -$5,536
SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN -$4,339 $420 -$4,759

So, the natural next step is to drill deeper and ask which firms contributed to the drop in the most extreme way? Again, the answer is below.

Firm symbol Net Income Change
NRG Corporation NRG -$6,433,000,000
Merck & Co., Inc. MRK -$6,339,000,000
Twenty-First Century Fox, Inc. FOX -$5,535,000,000
Yahoo Inc YHOO -$4,601,331,000
EP Energy Corp EPE -$4,365,000,000
Devon Energy Corp/DE DVN -$4,124,000,000
Chevron Corp CVX -$4,059,000,000
Exxon Mobil Corp XOM -$3,790,000,000
Ultra Petroleum Corp UPL -$3,414,365,000
Conocophillips COP -$3,411,000,000

So now we would like to go slightly further and ask why? Is there a pattern? What is happening? Using Calcbench, we again find our answers in ONE-TIME ITEMS!! See below

So the lesson is, when in doubt, Calcbench it!

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