What’s in a headline?
Stop me if you’ve heard this one before: news headlines can be grossly misleading.
Example #1: Consumer Spending
Top story on the Google News business page this morning: the numbers are in for February’s U.S. consumer spending.
The Bloomberg headline is the most accurate; the Times headline is accurate if tepid; the MarketWatch headline is (in my view) simply misleading.
Larger issue: there’s a big difference between a decline (or “fade” etc.) in something and a decline in growth in something.
The Madness of Earnings Season
The worst offenses in this vein often come during earnings season, when things get much more complicated. The key reason for this is that there are so many numbers in play:
- revenue
- earnings (and, by extension, earnings per share)
- revenue growth
- earnings growth
- analysts estimates of #1 – #4
- share price
If all the numbers tell the same story, no problem. But what if all of these things emerge from XYZCorp’s quarterly report:
- flat revenue, ergo
- decline in revenue growth;
- increased earnings, but
- a lower year-over-year rate of earnings growth;
- dissapointment among analysts about one or more of these numbers; and
- a sharp decline in share price.
That set of facts could lead to many different headline interpretations, for example:
- “XYZCorp Sees Higher Earnings on Flat Revenues; Shares Decline”
- “XYZCorp Shares Hammered after Revenue Miss”
- “Lackluster Earnings Growth Pummels XYZCorp Shares”
- “XYZCorp Grows Earnings Despite Tough Economy”
- Et cetera.
The point is, the set of numbers is complex enough (and that’s before we get into things like EBIDTA, “pro forma” earnings, and the like) that the headline writer can often decide which spin to put on the story, then write the headline to suit — much to the detriment of the reader trying to make sense of things.
Example #2: Layoffs
Another story from the same page of Google News:
Again, Bloomberg gives a sober take on this, as does the Guardian. The top headline? . . . Not so much. The problem is “slash.”
Now, I realize that the story is appearing in the Boston Business Journal, and I grant you that losing “scores of job” in your area isn’t good news. But “slash”? No. A quick look at the historical financials page for our record on Google reveals that the company has had at least 3,000 employees every year since 2002, and that as of December 2008 it employed 20,222 people. Cutting less than 1% of a company’s workforce doesn’t — can’t — equate to “slashing” jobs.
Especially when the Bloomberg story clarifies thus:
The cuts will affect workers globally, Google said in a blog posting today. Employees will have a chance to find other positions within the company. There are no plans for further cuts, spokesman Matt Furman said.
The moral of this story: Especially since the real implications of the business news are bad enough these days . . . let the headline reader beware.
~
Top image via the Library of Congress.
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>> “…there’s a big difference between a decline (or “fade” etc.) in something and a decline in growth in something.” <<
Exactly. And exactly the point that Reagan and the GOP used to try to make when the Dems would assail them for “cuts in Medicare spending” when what they were actually doing was slowing the rate of increase in the spending. The spending was still going up….just not as fast.
Disclaimer: I’m defending the point only, not a particular polical party.
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