Tuesday, April 14, 2009

The Press, NYT’s Norris Excepted, Gives Goldman a Pass

From the Columbia Journalism Review's The Audit blog:

News of Goldman Sachs’s good first quarter is all over the business press today, as it should be.

But the turn in its fortunes was due in no small part to an accounting quirk: The company switched its earnings calendar to a traditional quarterly schedule, leaving December an “orphan month”—one that just so happened to be very unprofitable.

Floyd Norris tipped his readers off to this on his New York Times blog today.

So I thought it would be interesting to analyze how the majors handled this little hiccup, as well as the broader Goldman earnings coverage. Turns out—not so well.

The Wall Street Journal fared worst of the four business outlets I looked at—at least on the “orphan” issue. The headline on its C1 earnings story is pretty rah rah:

Goldman Flexes Its Profit Muscle

And the loss-heavy “orphan month” of December? Relegated to one sentence, and it’s the dead last one—with zero explanation:

Goldman broke out the results from the stub December period separately, reporting a loss of $780 million, or $2.15 cents a share.

Bloomberg was no better. Here’s its story’s December reporting:

The bank also said yesterday that it lost $780 million, or $2.15 a share, in the month of December, before the start of its new fiscal year.

The Times’s story was just a bit better than those two, giving the matter a whole paragraph!

While Goldman reported a strong first quarter, it also reported a loss of $1 billion in the month of December, underscoring how quickly its fortunes can change. That month was reported on its own because Goldman is changing the timing of its fiscal year by a month, to match the calendar year. The loss was in part related to write-downs on high-yield bonds, as well as deterioration in real estate.

At least it has an explanation for why the company did such a thing.

Finally, the Financial Times only gives a paragraph, too, but it explained why the “orphan month” happened and explicitly signals to the reader that this, coincidentally or not, helped boost Goldman’s first quarter...MORE

Here's the NYT's DealBook blog:

Analysts See Weak Spots in Goldman’s Results

At first glance, Goldman Sachs seems to have had a blowout first quarter. But some Wall Street analysts don’t think the results are as amazing as they initially appeared.

Digging into the numbers that Goldman reported Monday afternoon, they raised questions about whether the results got a one-time lift from the money Goldman received through the government’s bailout of American International Group — something the company disputes — as well as a change in Goldman’s reporting calendar.

Goldman’s shares were down nearly 6 percent to $122.68 in early trading Tuesday. Much of the decline was likely because of Goldman’s stock offering, in which it sold about $5 billion in new shares for $123 each, about 5.5 percent below Monday’s closing price.

In Monday’s earnings announcement, Goldman said it earned $3.39 per share in the first quarter, more than double than the median estimate among analysts, which was $1.59 a share.

Goldman’s trading unit did far better than expected — but the firm was also allowed to stuff some losses into the orphaned month of December.

As Floyd Norris of The New York Times previously noted on his blog, Goldman changed its quarterly reporting structure from fiscal-year reporting to a calendar year, as a result of its conversion to a bank holding company....MORE