Why Earnings Just Don’t Make Sense (Part 4)

I find pretty much everything about these reports on Google’s 2013 Q4 earnings announcement to be confusing.

My review suggests different media outlets can interpret corporate earnings differently.

Poor writing can make it seem like one media outlet doesn’t even agree with itself!

Also confusing is the post-earnings stock movement. Intuitively, I would expect a stock to go up (down) following a good (bad) earnings report. Sometimes it may be hard to say what is good or what is bad, though.

I do believe that eventually (i.e. within a few days), the media usually does a pretty good job of retroactively explaining stock price reaction. They do this by pointing out something in the announcement that is either good or bad. This can be done because rarely, if ever, is every fundamental measure revealed from an earnings announcement good or bad. The media can always cite something to support its report whether it be positive or negative in tone.

I don’t believe any of this retrospective analysis to be actionable, however, in terms of developing potentially profitable trading strategies. I am also not convinced that any fundamental measure is significantly correlated with subsequent stock price changes. Show me the data if you believe otherwise.

Can you see why this is categorized under optionScam.com? I will take one more blog post to explicitly state that argument.