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Positive Earnings Surprises
Earnings Surprises, the next metric in your stock analysis, is also located on the Analyst Info page.
Importance of Positive Earnings Surprises
Each quarter a company will announce its earnings. 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.
Scoring Positive Earnings Surprises
- Pass—Give this factor a passing score if the actual EPS is greater than the consensus EPS forecast over the last six quarters.
- Fail—Give this factor a failing score if the actual EPS is lower than the consensus EPS forecast over the last six quarters.
Looking at the positive earnings surprises for GOOG in Figure 13, it should receive a passing score. You can see that the reported earnings were higher than the estimated values in five of the last six quarters. This is a great trend.
Positive Earnings Surprises: PASS
Figure 13—Earnings Surprises
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