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The Morning Ledger: SEC Probes Whether Firms Rounded Up Earnings |
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The SEC is looking into whether companies have improperly rounded up quarterly earnings, with at least 10 companies receiving requests to provide information to the agency. PHOTO: ANDREW HARNIK/ASSOCIATED PRESS
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Good morning. The U.S. Securities and Exchange Commission is investigating whether companies have improperly rounded up their earnings per share to the next highest cent, people familiar with the matter told the WSJ’s Dave Michaels.
SEC enforcement officials have queried at least 10 companies, asking them to provide information about accounting adjustments after academic research found the number “4” appeared at an abnormally low rate in the tenths place of companies’ earnings per share. Reporting that figure as “5” or higher allows a firm to round up its earnings per share another cent.
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A company with earnings of 55.4 cents a share, for example, would round to 55 cents a share, while a company with earnings of 55.5 cents a share would round to 56 cents.
Public companies have strong incentives to report higher earnings per share, particularly those followed by Wall Street analysts whose quarterly forecasts are used to benchmark corporate performance. Investors often snap up shares of companies that beat expectations, even by a cent, and, likewise, sell shares of companies that miss their forecasts.
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Commerce Secretary Wilbur Ross, right, said ‘the President has made clear his desire to protect American technology.’ PHOTO: MARK WILSON/GETTY IMAGES
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President Donald Trump plans to ratchet up commercial tensions by barring firms with at least 25% Chinese ownership from buying U.S. companies involved in “industrially significant technology” and by blocking additional technology exports to Beijing, said people familiar with administration plans.
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Global stocks headed lower Monday, as investors continued to parse the impact of a trade spat between the U.S. and China.
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General Electric Co.’s factories making magnetic resonance imaging machines, or MRIs, in Florence, S.C., and Waukesha, Wisc. are caught in the trade fight between Washington and Beijing, offering a window into the complex interconnections of global trade.
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President Donald Trump repeated Friday his threat to slap stiff tariffs on European cars, hours after the European Union started imposing duties on a range of American products worth $3 billion in retaliation for separate Trump curbs imposed on steel and aluminum.
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Cummins Inc., which imports engines and other products from its factories in China, is among U.S. companies likely to be stung by an American tariff on its own Chinese-made goods that takes effect next month. Beginning July 6, those engines and some of those components will be subject to a 25% tariff at the U.S. border.
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Brazil’s central bank releases data showing how a truck drivers’ strike in May disrupted the country’s trade with foreign nations. The current-account figures are likely to reflect a sharp decline in exports during the 10-day stoppage in transportation.
Uber Technologies Inc. executives and lawyers will appear in a London court on Monday to appeal a decision by regulators last September that the ride-hailing firm was unfit to operate in the British capital.
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Investors will learn this week whether Conagra Brands Inc. is still outpacing General Mills Inc. in the race to revive older food brands. General Mills reports fourth-quarter results on Wednesday, while Conagra reports results on Thursday.
The U.S. durable goods data are due out on Wednesday. Economists surveyed by the WSJ forecast orders for durable goods fell 1.0% in May, after a 1.7% decline in April.
On Thursday, the U.S. Commerce Department releases its third estimate for first-quarter gross domestic product and its second estimate for corporate profits. Economists expect the first-quarter GDP reading to remain at 2.2%.
U.S. personal income and spending report is expected on Friday, the report will also provide insight into inflation. Economists forecast personal income rose 0.4% in May, while consumer spending was also up 0.4%.
European Union statistics agency data on inflation, also due out Friday, are expected to show inflation inched up to 2% in June from 1.9% in May.
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A deal by GE to sell its industrial engines unit would be part of a larger plan by the conglomerate to sell assets in a bid to simplify the company. PHOTO: LOIC VENANCE/AGENCE FRANCE-PRESSE/GETTY IMAGES
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General Electric Co. is nearing a deal to sell a unit that makes large industrial engines to private-equity firm Advent International for $3 billion or more, people familiar with the matter said, a move that would bring in needed cash for the struggling conglomerate.
Fast-growing Chinese technology startup Meituan-Dianping applied to list in Hong Kong and seeks to raise billions of dollars to help finance its growth strategy in what is a highly competitive internet marketplace. The company is targeting a valuation of more than $60 billion, according to people familiar with the matter.
South Korea’s military has picked Boeing Co. to supply the country’s maritime patrol aircraft in a contract worth around 1.9 trillion won ($1.71 billion), a senior company executive said on Monday, reports Reuters.
Intel Corp.’s next chief executive will take over the Silicon Valley chip giant just as it is falling behind in the expensive race to shrink the circuitry on silicon chips. Intel’s continuing problems manufacturing its next generation of chips are opening the door for rivals to threaten its near-monopoly in the personal-computer and server markets.
AT&T Inc. Chief Executive Randall Stephenson expressed interest in acquiring CBS Corp. and met with Shari Redstone, the executive whose family controls the media company, before Mr. Stephenson set his sights on Time Warner Inc., according to people familiar with the situation.
Netflix Inc. Chief Executive Reed Hastings said he fired his chief communications officer after he used a racial slur in his conversations at work on multiple occasions, an episode that has created a moment of introspection at the streaming juggernaut.
U.S. shale companies, which profited by continuing to pump oil as the rest of the world cut its production, are again poised to benefit as the Organization of the Petroleum Exporting Countries boosts its output.
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An investor monitors stock prices at a brokerage house in Beijing on March 23. PHOTO: MARK SCHIEFELBEIN/ASSOCIATED PRESS
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Central bankers in the U.S. and Europe shouldn’t be deterred from raising interest rates and winding back stimulus policies by the increased financial market volatility that will accompany their efforts, the Bank for International Settlements said.
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Japan’s Toshiba Corp. on Monday said the U.S. Securities and Exchange Commission had completed an investigation of its past accounting practices without fining the company, reports Reuters.
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To fix Russia’s broken banks, the Kremlin needs improved relations with the West and to regain access to foreign capital, and the collapse several private banks has proven a major economic test for President Vladimir Putin as he confronts the West.
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Erez Yungman, top, watches the work of “Flippy,” a burger-flipping robot at CaliBurger in Pasadena, Calif. PHOTO: NICK AGRO FOR THE WALL STREET JOURNAL
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Amid the lowest unemployment in years, fast-food restaurants are turning to machines—not to get rid of workers, but because they can’t find enough.
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China’s central bank is freeing up more than $100 billion for commercial banks to boost lending and restructure debt, as the Chinese leadership tries to shore up growth amid slowing momentum for economic expansion and an intensifying trade brawl with the U.S.
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OPEC ministers agreed to a deal on Friday to boost oil output by about 600,000 barrels a day, moving more modestly than expected to curb higher oil prices.
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Savvy shoppers who buy big-ticket items online to avoid state sales taxes will be losing that advantage after the U.S. Supreme Court ruled Thursday that states can collect tax from all online purchases, but such a change will take time.
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