Translating earnings into easy-to-understand articles

Arthur Brisbane, the public editor of the New York Times, writes Sunday about how business journalists decipher earnings releases into stories.

Brisbane writes, “If you are a reader of these stories, you can be forgiven for not knowing what to think. The problem is not new, but it is changing. Veteran business journalists trace some of the difficulty to the dot-com boom, when tech companies convinced analysts and journalists that plain old net income, the standard measure of profit, wasn’t as important as the clever new metrics they were introducing.

“Dean Starkman, who runs the blog The Audit for The Columbia Journalism Review, recalled the period as a time when some companies touted results ‘based on everything but net income: eyeballs and clicks and traffic; this, that and the other.’

“‘It has always been this cat and mouse thing,’ added Mr. Starkman, who at the time reported for The Journal, in which ‘reporters are hopefully trying to figure out the actual performance of the company in the previous quarter and managers are trying to put the best spin on it. Analysts had a third job, which is to try and forecast the future prospects. So to do that, they might strip out all sorts of things.’

“Stripping things out often meant assembling a picture of the company’s financial performance, minus the bad things. Bingo: rosy results and prospects.”

Read more here.