The earnings and revenues estimate game that the analysts play has put the company CFO’s, who give the outlooks, in a no-win situation. Here’s how it has come to work over time: It doesn’t seem to make any difference how good or bad the actual results are, whether they are up 3%, or 30%, or 70%, or more. The only thing that the headlines pick up is whether the earnings beat or missed analysts’ estimates. (Who cares???)
I’m not going to defend the estimates game and I 100% agree that we should be looking at medium to long term only how well a company is growing, etc.
But…
I can understand, a little, how and why this happens. In theory, as the earnings date approaches the stock price reflects the value for the average of the earnings. If earnings match this and the outlook is for the same, then the short term price should stay the same. But if earnings and/or outlook is better the the price will bump up…likewise down. This is mostly noise with the actual long term growth and margins being more important…however the estimates, generally, predate the actual earnings.
Mike