Earnings Estimate

The estimates made by analysts following the stock on the company’s next quarter or year’s earnings.

When a company overshoots or misses earnings, it may cause large volatility in the company’s stock price. Some people in the financial world believe that stocks sometimes move irrationally after earnings are announced and miss consensus(average overall estimates made by analysts) estimates. Missing a penny of EPS in estimates may cause a large fall in a stock price, which may not truly reflect the financial performance of the company. Some people believe this is due to the focus of Wall St on short term earnings and may present a good opportunity for investors to buy.

One person interviewed in one of the “Market Wizards” series believes that some stocks may continue an uptrend after beating earnings estimates(and moving up strongly the day after earnings are announced). This may be a phenomenon worth considering and further research.

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