GO
Loading...

What's Behind All the Surprises in Corporate Earnings

Can earnings guidance be trusted? Firms as disparate as Caterpillar, Cummins, Yahoo! and Research in Motion all beat first-quarter earnings expectations.

David Dropsey, equity research analyst at Thomson Financial, and Dirk van Dijk, director of research at Zacks Investment Research, gave "Power Lunch" viewers their perspectives on the apparent data gap.

Van Dijk told CNBC's Bill Griffeth that analysts should have expected the quarterly outcomes: "It's the same situation over and over again," he declared.

The research director pointed out that in 2006, each quarter had "far more positive surprises than disappointments," beating views by 3% to 3.5%.

"Lo and behold, it's almost identical this time," Van Dijk said: Excluding tech firms, the median of all who reported came in at 2.9% over expectations. He believes that "companies have discovered it's better to under-promise and over-deliver."

Dropsey said that earnings "stats are accurate," especially for the first quarter. He explained the surprises as "a lack of positive guidance" -- due to "analyst and executives alike" who "didn't want to get caught up in a slowdown."

He believes that "analysts were playing into fear and keeping their numbers down" to avoid looking "foolish."

Symbol
Price
 
Change
%Change
VOW3
---
CMI
---
BB
---
YHOO
---
Symbol
Price
 
Change
%Change
YHOO
---
CAT
---
CMI
---
BB
---
AAPL
---

Featured

Contact

  • Showtimes

    United States
    Monday - Friday 1:00P ET
    Europe
    Monday - Friday 18:00 CET
    Asia Pacific
    Tuesday - Saturday 01:00 SIN/HK
    Australia
    Tuesday - Saturday 03:00 AEST
  • Sue Herera is a founding member of CNBC, helping to launch the network in 1989. She is co-anchor of "Power Lunch."

  • "Power Lunch" & “Nightly Business Report” Co-Anchor

Power Pitch

Kenny Polcari