Breaking: Goldman $5B Writeoff, Adtran Warning Point to Telco Capex Cut & Highly Distorted Earnings to Come
Goldman Sachs took a $5B writeoff this morning for the new tax law and Bloomberg expects $20B more from Citi. Verizon and AT&T have some of the same issues so may see similar. Do not believe U.S. earnings results in the next year or two because balance sheet adjustments may overwhelm underlying trends. Underneath it all, all these companies are extremely profitable and the tax changes will put them ahead. But the numbers the next 24 months could be highly misleading.
Verizon has $46B in "deferred long term liabilities" and $38B in poorly defined "other liabilities." Major adjustments - up or down - would surprise no one. Phil Cusick of Morgan did an analysis a while back from which I inferred Verizon would need writedowns. Since he hadn't said that explicitly, he got angry at me and cut me off his distro. (I'd like to be back. His analysis then and other times was on target.) I haven't trusted Verizon's financials for a decade because of unclear items like these liabilities and enormous goodwill. Former CFO Stephenson at AT&T has long been a wizard at delivering the numbers he wants to.
Suggestion: If you are putting money into this industry, closely follow analysis from John Hodulik and Craig Moffett. They are among the best at finding reality beneath the figures reported.
Separately, Adtran pre-announced 4Q sales at $125M, $20M less than the last three quarters.