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Q & A

Each earnings season, it seems that one or two of my stocks will deliver profits and sales that beat Wall Street expectations, then tumble on...

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Tools & Resources

Real Questions from Real Subscribers

Q: Each earnings season, it seems that one or two of my stocks will deliver profits and sales that beat Wall Street expectations, then tumble on the news. Sometimes, a stock posts disappointing results but surges on the report. What gives?

A: Dear Subscriber,

The Securities and Exchange Commission has required quarterly earnings reports since the early ’70s. For a long time, simply beating analyst estimates would help propel a stock higher, while weak results would torpedo a stock. Today, more companies offer guidance about expected sales and earnings – critical projections that drive expectations for investors.

Note that earnings guidance is voluntary and isn’t required by the SEC. Nevertheless, many companies choose to provide the information. We encourage investors to continue reading past headline results or the first paragraph or two of an earnings release, as companies often present their guidance deeper into the report. In some cases, company guidance comes not from the release, but from the conference call, in which case you can read about it in the financial media or listen to the call yourself on the company’s website.


Thanks for your interest,

Bob Sweet, CFA
Managing Editor, Dow Theory Forecasts

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