- Stocks Lurking Near New Highs Again
- Risk Trade Is Back On
- This Week's Biggest Story: The Dollar
- Corporate Issuance Continues at Torrid Pace
- The Bernanke Dollar Bounce & Gross Says Forget About Rate Hike
- Colgate Really Sparkles After Hours
- Light Volume Has Traders Complaining
- Gold Shatters Another Record
- Have Retailers Reached Their Limits?
- The Retail Mind Game
TRADER TALK RSS FEED
MOST SHARED
- Tiger Woods Out of Hospital After Accident
- Get Paid Six Figures to Wear a T-Shirt?
- 8 Retailers that Gain During the Holidays
- Dubai Spooks Investors But May Bring Buying Opportunity
- Finding the Holiday's Best Buys
- Global Selloff From Dubai Woes Shows Signs of Winding Down
- Dubai Fallout Is a Correction, Not Another Crisis: El-Erian
- Longer Lines, Fuller Carts This Black Friday
- The Good Entrepreneur Winner
- Banks Play Down Dubai Exposure, Investors Still Wary
- U.S. Stocks Fall on Dubai Worries
- Black Friday at Best Buy
- Strategists on Dubai: Avoid 'Rash Moves' Now
- Longer Lines, Fuller Carts This Black Friday
- Dubai Stock Market Fear Has 'Legs': Dennis Gartman
- Obama's Emission Reduction Pledge Paints Future for Autos
- Is Super Bowl Halftime Act Too Old?
- Surprising Options Trades in TiVo Shares
- EA Sports Hopes to Pump Up Sales Through Pop-Up Locations
- Global Selloff From Dubai Shows Signs of Winding Down
- Dubai Stock Selloff May Bring Buying Opportunity
- Tiger Woods Out of Hospital After Accident
- Dubai Fallout Is a Correction, Not Another Crisis: El-Erian
- Dubai's Debt Woes Signal New Era for Creditors
- Get Paid Six Figures to Wear a T-Shirt?
- The World's Biggest Debtor Nations
- Five Tips for Buying a Foreclosed Home
- Slideshow: Fantasy Christmas Gifts 2009
More Videos
Trader Talk
Text Size 
Ever wonder how good analyst estimates are? The Street watches them all the time, because...uh, there's no other game in town when it comes to projecting estimates.
The general belief among veteran traders and stock market reporters (myself included) is that the analysts tend to overinflate the earnings estimates of the companies they cover. They do this because being excessively bearish usually guarantees little if any access to the company, and the analysts assume that being more bullish will help their company provide financial services to the company they cover.
Now, along comes a study from Penn State professors Patrick Cusatis and M. Randall Woolridge which concludes (surprise!) that "long-term EPS growth rate projections are consistently overly-optimistic." From 1984 to 2006, the analysts' average one-year per-share earnings expectations were for 13.8 percent growth; average actual growth rate was 9.8 percent.
The only time analysts under-estimate earnings growth rates is for short periods of earnings recoveries after economic recessions, and in that case they are too bearish. That, by the way, is about where we are right now.
LATEST FROM TRADER TALK
Questions? Comments?
POPULAR TRADER TALK POSTS
- Stocks Lurking Near New Highs Again
- Risk Trade Is Back On
- This Week's Biggest Story: The Dollar
- Corporate Issuance Continues at Torrid Pace
- The Bernanke Dollar Bounce & Gross Says Forget About Rate Hike
- Colgate Really Sparkles After Hours
- Light Volume Has Traders Complaining
- Gold Shatters Another Record
- Have Retailers Reached Their Limits?
- The Retail Mind Game
Data is a real-time snapshot *Data is delayed at least 15 minutes