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Big Differences In Earnings and Analysts' Estimates

What's the value of analyst estimates? Look at the enormous differences between actual earnings and analyst estimates for a couple of recent companies:

GM loss: $11.21
Estimate loss:: $2.62

Merrill loss: $4.97
Estimate loss: $1.91

These aren't the only ones: there are dozens of other examples in financials, autos, airlines and home builders where we have seen misses not of a few pennies, but of orders of magnitude.

The problems:

1) poor visibility: these industries are seeing business deteriorate on almost a daily basis

2) poor communication and data sharing: many companies provide little if any guidance and share as little information as possible, leaving analysts to either develop their own sources or remain at the mercy of the company

3) poor quality of analysts: the best analysts have left the sell side and now work for the buy side. The remaining sellside analysts, as a group, are of lesser quality.


Questions? Comments? tradertalk@cnbc.com

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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