Earnings Surprises - The NASDAQ Dozen
Earnings Surprises, the next metric in your stock analysis, is also located on the Stock Research page. To access it, click on the Earnings Surprise link at the top of the page (see Figure 12).
Figure 12—Earnings Surprise Link
Why We Look at Earnings Surprises
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
- Pass—Give the earnings surprises a passing score if the EPS surprises during the past four quarters have all been positive.
- Fail—Give 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 13, WMT should receive a failing score. You can see that the earnings surprise was negative for the quarter that ended April 2009.
Positive Earnings Surprises: FAIL
Figure 13—Earnings Surprises
All content in this article is supplied by Wade Hansen of Learning Markets. To learn more about their investor education offerings, please visit learningmarkets.com. Find more great articles from Learning Markets in our news sections.
