The Supply Of Cookie-Jar Earnings: United Technologies Edition

I was but listening to a Nov presentation made past times United Technologies - a large in addition to real fine American company. Mostly I was listening for the comments on Pratt & Whitney equally Bronte has multiple investments inward the jet-engine business.

But I was struck alongside the forthrightness alongside which Gregory Hayes (now the Chief Executive Officer) discussed net manipulation. You tin uncovering the transcript here. To quote:

So we'll survive able to deliver on the numbers that nosotros had talked close before inward the year, which essentially was inward a range. We started out at $6.55; we're immediately at $6.75 to $6.85. We'll survive correct roughly $6.85 when the yr is said in addition to done. Still some puts in addition to takes, some headwinds roughly currency. But meridian trace looks corporation at $65 billion; bottom trace looks corporation roughly $6.85. 

I'd but betoken out, taxation extenders is non inward our numbers for the year. Who knows if we're going to larn extenders hither inward the final couplet of weeks of the year. My ain persuasion is that if nosotros larn extenders, we'll in all probability but restructure against that utilisation goodness or utilisation something else, equally opposed to trying to transcend along some other dime that's in all probability non going to hand anybody much of a benefit. So I intend we're done at $6.85.

So if President Obama signs a taxation mouth they won't reverberate that properly inward their earnings they volition but accept a restructuring charge so they don't ask to present the net to you.

In other words they volition utilisation "cookie jolt earnings".

Cookie jolt net were all the rage when I got into this business. Alex Berenson even wrote a mass close them. What shareholders wanted was shine net increment regardless of the vagaries of economical cycles - in addition to people created cookie jars in addition to manipulated net to present exactly that.

Listening to United Technologies I felt close fifteen years younger. What is erstwhile is novel again.





John

Disclosure: No seat inward whatever mentioned stock.