Brace for the Warnings Flood
Earnings season is exciting, but the real thrills start coming now, in the earnings-warning season. Companies are closing their books, and the ones that can't live up to analyst expectations will have to 'fess up now, or explain it to the judge later. Since earnings "surprises" are by definition surprises, they tend to move stocks. Clearly traders want to avoid the negative surprises -- or, if short, to seek them out. How is the third-quarter warning season shaping up?
One indicator I discuss regularly is the revision trend in the earnings estimates, which tells you on the margin how business is trending. If it's booming, analysts tend not to be reducing their earnings-per-share expectations -- common sense, eh? Meanwhile, companies whose third-quarter estimates have been trending downward are at high risk of coming in below the already-reduced consensus, since analyst revisions tend to lag the actual change in business conditions....170 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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