- Why The Market Was Weak Today
- Market Feeling Consumer Spending Slowdown
- Fannie Mae Gets Boost -- Mixed Results Elsewhere
- Reminders Of Just How Bad Things Are
- Rally: We're At A Very Important Point
- Key Earnings Phrase: Reaffirms Full Year Guidance
- Financials Rally A "Violent" One
- Repeat Of Financials Selloff Seems In Doubt
- Earnings: Glass Half Empty Or Half Full?
- Bulls Find No Joy In After Hours Session
- Pisani: New ETF = Play on Mid-East Growth
- Existing Home Sales: A Look At Numbers That Weren't There
- Comicon: Not Just Funny Business
- See What People Are Saying About... Water Scarcity
- Microsoft's Ballmer Addresses Analysts
- Fast Money: Wall Street Got Drunk!
- Play the Coming Power-Grid Upgrade
- Microsoft's Johnson: What His Leaving Means For Company
- Essential Oils For Your Portfolio
- Gassing Up With Garbage
- UBS Target of Fraud Suit from NY Attorney General
- SEC Plans to Broaden Curbs on Short Sales: Cox
- 30-Year Bond Gains Full Point as Stocks Weaken
- FCC Agrees to Approve Sirius Pruchase of XM: Report
- Union Pacific Profit Rises, Beats Estimates
- Bristol Profit Beats Forecasts, Helped by Plavix
- Jobless Benefit Claims Rise above 400,000
- 3M Profit Up 3%, Tops Estimates
More Videos
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.
related content |
Questions? Comments?
Del.icio.us
Digg It
Data is a real-time snapshot *Data is delayed at least 15 minutes