Earnings Season Begins: Fewer "Beats" Than Before

Earnings season gets under way this week, and so far we've seen less "earnings beats" than in prior quarters since the 2003 lows.

With just 11% of S&P 500 companies reporting, 62% have beaten estimates, while 19% have missed estimates. Analysts have been overly optimistic compared to past quarters.

click to enlarge

Chart courtesy of Birinyi Associates

Comments

[NutritionFacts:]

Is this entirely unexpected? Does not January exhibit a statistical tendency to be the weakest quarter of the year for earnings?

2007 Jan 23 05:58 AM

[Paul Meisel:]

It seems to me that the chart demonstrates primarily that the process is stage-managed; corporations want to meet or beat and so relatively few miss.

Another possible interpretation is that analysts are too cautious, or that they are just not very good at forecasting earnings.

Having spent a fair piece of my life doing corporate earnings forecasts from the inside, I can tell you that this data says a lot more about the process than it does about the economy.

2007 Jan 24 12:24 PM