Earnings Surprise

When the quarterly or yearly earnings reported by a company are above or below analysts’ estimates by a large enough amount to cause a large move in the stock price.

Earnings surprises are usually followed by a rise in the stock price while earnings disappointments are usually followed by declines in the stock price.  However, earnings guidance(the estimate given by the company’s management for future earnings and outlook) may affect the stock price positively or negatively even if an earnings surprise is to the downside or upside.

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