Our latest analysis examines the frequency in which companies in the S&P 1500 index exceed or fall short of analyst EPS and revenue estimates and quantifies the impact on stock prices. The results show that positive earnings surprises result in positive excess returns, while in-line results and negative surprises both result in underperformance on average. Revenue surprises result in directionally similar excess returns, and when combined with earnings, significant positive excess returns can be expected on average when both EPS and revenue beat analyst expectations.
Please click here for the full report; highlights follow below.
• Over the past five years, 64% of S&P 500 companies have beaten consensus EPS estimates.
• Companies that beat EPS estimates saw their stock outperform the index by 1.6% the following day on average, while those that missed underperformed by 3.4%. Companies that reported EPS in line with estimates underperformed the index by 1.1%.
• The magnitude of excess returns following quarterly earnings reporting was sorted by company size. Large capitalization companies had smaller price changes than mid-caps or small-caps, potentially indicating a more efficient market within the large cap universe.
• Companies that beat revenue estimates outperformed the index by 1.4% the following day on average. Negative revenue surprises resulted in underperformance of 2.0%.
• Positive EPS surprises are not typically rewarded unless they are accompanied by positive revenue surprises, underperforming the index the following day by 0.1% on average.
S&P 1500: OUTPERFORMANCE FOLLOWING QUARTERLY REVENUE REPORT
Source: I/B/E/S
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The analysis was prepared by Greg Harrison, Senior Research Analyst at Thomson Reuters – please feel free to quote him directly from this report. If you have any questions, requests for additional data or would like to chat with Greg, please get in touch. For further corporate earnings insight throughout the week, please click here.
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