Tivo: A Tale of Two Earnings

05/11/2017 2:45 am EST

Focus: STOCKS

Crista Huff

Editor, Cabot Undervalued Stocks Advisor

On May 3 and 4, 2017, the financial news media made a mess in reporting the first quarter financial results at TiVo Corp. (TIVO); as a result, I felt compelled to set the record straight, asserts growth stock expert Crista Huff, editor of Good Fellow.

TiVo Corp. reported first quarter 2017 non-GAAP $0.40 earnings per share (EPS) vs. the consensus estimate of $0.27. Various news agencies reported all of the following incorrect EPS numbers: (0.29), $0.22, $0.29, $0.30 and $0.45.

Various financial media reporters looked at the company’s press release, and each proceeded to report various inaccurate numbers to their readers.

That’s because TiVo did not report a number for non-GAAP earnings per share (EPS), which is the number Wall Street analysts use to make earnings projections, and to compare results to a company’s recent quarterly and annual performance.

However, TiVo did provide the numbers that are used to calculate non-GAAP earnings per share.

Reuters reported a first quarter loss of (0.29) per share, using GAAP basic and diluted EPS numbers. The Associated Press reported adjusted EPS of $0.30, but news agencies that published the AP story used GAAP numbers in headlines, such as “TiVo Reports 1Q Loss”.

On the evening of May 3, Briefing.com reported EPS of $.045. On the morning of May 4, Zacks reported adjusted EPS of $0.22 and the Charles Schwab website reported first quarter EPS of $0.29.

I felt uncomfortable publishing any numbers in my Special Bulletin to subscribers yesterday, because it didn’t agree with any of the news reports. I was thinking, “What am I missing here?”

It turns out that I wasn’t missing anything. And then I found this on the transcript of TiVo’s earnings conference call from the afternoon of May 3:

Question (from an analyst at an investment firm):

“I’ll start off with a housekeeping question to calculate non-GAAP EPS. So I have around $54 million in pretax income and $6 million in cash taxes. And using 120 million in diluted share count, does it direct to $0.40 non-GAAP EPS?”

Answer (from Peter C. Halt, TiVo’s CFO):

“That would be the correct calculation.”

And there you have it: $0.40 EPS, everybody reported it wrong, and the share price fell dramatically.
I tend to be relaxed about share price volatility, because everything eventually comes out in the wash.

The analysts and institutions that propel the bulk of stock purchases will not misunderstand the company’s financial reports. They will recognize a bargain when they see it, and they will drive the share price up.

Subscribe to Crista Huff's Good Fellow here…

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