5. Positive Earnings Surprises - The NASDAQ Dozen
Companies announce their earnings every quarter. Leading up to this event, analysts will make predictions as to what they think the earnings per share (EPS) will be. These predictions are often used as a benchmark by market participants. If the actual EPS comes in higher than the expected amount, this is generally good for the stock price. If the actual EPS comes in lower than the expected amount, this is generally bad for the stock price. When analyzing a company's earnings surprise track record, you want to see that the company is consistently meeting or beating its expectations.How to Score Earnings Surprises
- PassGive the earnings surprises a passing score if the EPS surprises during the past four quarters have all been positive.
- FailGive the earnings surprises a failing score if any of the EPS surprises during the past four quarters have been negative.
Looking at the earnings surprises for WMT in Figure 10 WMT should receive a passing score. You can see that in Fiscal Quater End, WMT met the expecations, which is why it is displaying a % surprise of zero.
Positive Earnings Surprises: PASS
Figure 10Earnings Surprises
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