A trader looks at his screen as he works on the floor of the New York Stock Exchange March 13, 2014.Lucas Jackson/Reuters
Almost every quarter is a great quarter, guys.
The earnings conference call is a routine of corporate America. Companies post financial results, and financial analysts dial in to the conference call.
"Great quarter, guys!"
From 2007 through 2014, analysts told companies "Great quarter, guys," on 1,265 of the calls. Bloomberg tracked how many companies were told what a fine job they did, then compared it with the Standard & Poor's 500 index for the quarter when the results were reported.
While it was very often a great quarter, guys, it wasn't always as great in the broader market.
In fact, the best quarter ever, guys, was the first quarter of 2008, a few months before the market crash that erased about half of the S&P's value from September, 2008, to March, 2009.
The worst quarter of great quarter, guys, was the fourth quarter of 2014. Only 19 companies were told how well they did, less than a third than in the early days of 2008.
Equity analysts have a tendency to be positive. Out of 12,031 current ratings on S&P stocks, only 6.9 per cent are to sell, versus 48 per cent rated buy and 45 per cent rated hold, according to data compiled by Bloomberg. That's almost unchanged from a year ago.
"It has to do with access," said Les Funtleyder, a health-care portfolio manager at E-Squared Asset Management, who's been both a buy- and sell-side analyst. "Companies prefer to deal with people who they feel are on their side. Analysts want to be liked by management, so they can get more information."
Some are self-aware. "Don't mean to be cheesy, but that was a very good quarter," Eric Selle, then a debt analyst with JPMorgan Chase & Co., said in 2009 after Ford Motor Co. reported a smaller-than-expected loss. "I know everybody hates when analysts say that."
Mr. Selle, now a managing director with SunTrust Robinson Humphrey, hates it too. "It's like everyone getting a medal in soccer," he said in an interview. "It's the most embarrassing thing to say as an analyst."
Ford deserved it, though. "They were coming back from the dead," Mr. Selle said. "I had to pause and say, guys, actually, it was a really good quarter."
It's not just about great quarters, though. There are deals to be lauded.
While the United States has been in a record period of mergers and acquisitions – $4.1-trillion (U.S.) in proposed, pending, or completed deals in the past two years – it was also high time for congratulations: 221 companies were told "Congrats on the deal, guys" or some iteration by analysts.
They didn't always deserve it.
Of 30 deals that were struck in the first part of 2013 where analysts said congrats, a third of the companies had negative stock returns after the transactions closed. Half didn't beat the S&P over the same period.
RF Micro Devices Inc. and TriQuint Semiconductor Inc. announced they'd merge in February, 2014, and turned into Qorvo Inc., a $10-billion technology company.
Nine different analysts congratulated them during the call discussing the deal.
Since the merger closed in January, the stock is down 0.4 per cent. The Russell 2000 index, of which Qorvo is a member, is up about 4.5 per cent in the same period.
It's not all bad news, though. Cross Country Healthcare Inc. isn't a big company – only about $360-million in market capitalization. When it agreed to buy Medical Staffing Network Holdings Inc. in June, only one lonely analyst said congrats.
Cross Country's shares, though, are up 78 per cent.
Congrats, guys. Have a great quarter.