Corporate earnings look pretty good, don’t they?
source: http://www.scholarsandrogues.com/2010/02/12/corporate-earnings-look-pretty-good-dont-they/
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- hoosierdaddy
- added this
So maybe we have this the wrong way around. Because there are two ways to look at this phenomenon. The first is how I’ve just described it—companies do better or worse than analyst predictions. But we could just as easily flip this around and ask—how are analysts doing? Especially since the market seems to put a pretty high premium on what they’re thinking. And these people generally get paid a lot, a whole lot. Maybe the question should be did the analyst get his or her call right, rather than did the company beat or miss the analysts’ predictions? Because if we look at earnings reporting in this light, it’s pretty clear that US analysts have been consistently underestimating how US companies actually perform. And in this regard, we have to ask whether or not US analysts even deserve that paycheck—because their miss rate seems pretty high. And if these guys show that they can’t get it right, why should they be paid a lot of money? And why should we (specifically, the financial press) listen to them?
