It should be simple to work out whether a company is doing well. Ask yourself, “Did it make a profit or loss? Was that profit or loss bigger or smaller than expected? If life were only that simple as we have discovered when we set out to create “The Q25!
Since we are in the middle of the US quarterly earnings season, we scoured the latest corporate results for signs of what is happening in the economy. We went further than the numbers themselves…we read the statements that went along with the report, because companies told us why things were good or bad. The earnings season is a good window into the corporate world.
We chose 25 of the top US companies from the SX&P500 that were reporting last week. They were a broad selection, across a range of industries.from the bank giant Citigroup, to Delta Airlines, to fast food McDonalds. We then looked at the results and assigned a red apple if we felt things were looking grim and a green apple if there was more hope than despair. We call them “The Q25.
So each day, throughout “Quest Means Business, we have been filling two vases with apples, a Red Delicious or green Granny Smith’s apples to get an “overview on earnings (don’t worry – the apples didn’t go to waste, we gave them away at the end of the week.)
Some companies were out-and-out Green Applers – Apple for instance, with its stellar performance with the iPhone and iTunes. Yahoo too, with good numbers and a reasonable prospect for the future, along with cost-cutting and a general feeling the company has a grip on the economic crises. Others were Red no-hopers this quarter, such as the bank Morgan Stanley which missed its numbers and had poor guidance. Kimberley Clark, the household product maker (Huggies and Kleenex), if not exactly recession proof, should be resilient. But it wasn’t. Sales and profits were down because shoppers are shunning branded products they love for generic products that might be cheaper.
Since we were using more than just the numbers, we had lively debates in the “Quest Means Business office about whether a company should get a red or green piece of fruit. Caterpillar, for instance, makes the large yellow earth moving tractors and equipment. Caterpillar reported a loss that actually showed that beat market expectations (a raft of one off items along with tax gains). If you then read the companies pretty dreadful outlook, it became clear this was a clear Red apple.It was the same for Boeing.
We had expected the Reds to win overwhelmingly. But what surprised me, was that throughout the week, the two vases were neck and neck and by week’s end, the Green’s were actually winning. Companies are not doing as badly as you might think.
Our home-made barometer told us that even though the economic data is horrible, companies are taking the opportunity to clean themselves up and take decisions that will have lasting effects long after this recession is over. “The Q25 showed us that companies are cutting costs, making themselves leaner and fitter to take advantage of the recovery, whenever that arrives.
Oh yes, our “Q25 apples also gave my colleagues something healthy to eat at lunch. A winner all round I think!
Richard Questis a CNN anchor and correspondent who reports on business travel issues. Tune in to CNN International each evening at 9 pm to catch Richard’s show, “Quest Means Business.
