Claire Corlett

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Nonsense About Earnings Estimates | Ken Fisher | Fisher Investments [2019]

Nonsense About Earnings Estimates | Ken Fisher | Fisher Investments [2019]

A lot of what goes on
with capital markets is kind of a dance. I like to think of it
as the Wall Street Waltz. The title of the book I wrote in 1987. The waltz about earnings estimates
is widely misunderstood. Media will commonly banter about “In this quarter, will earnings
exceed or not exceed analysts’ estimates?” It’s kind of nonsense because they
always exceed analysts’ estimates. That’s not the right question. They always exceed analysts’ estimates
because part of the Wall Street Waltz, every quarter is for management to talk
down analysts’ estimates so management can beat them. And in fact, some place between
60-75% of earnings always come in above analysts’ estimates. The real critical question is,
“What will management be doing about the talk moving forward,”
which is futuristic impacts on stocks. And when we think about that, you think about that in the here and now
of the chatter that goes with the earnings announcement. Right now, that’s actually talking up
the future compared to what was going on last quarter. When we look at next quarter,
the growth will be forecasted to be lower than last year, but the talk against
the numbers is more optimistic. It’s part of what fits into the pattern
of 2019 being a good year for the stock market
and part of the reason that stocks are doing better right now. But the fundamental point,
don’t pay attention to “Will stocks beat analysts’ estimates?” Pay attention to the talk
about managements’ talking down, and how much down, future estimates.

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