The Week Ahead: Are Earnings Expectations Too High?
Jeff Miller | Jan 06, 2013 12:44AM ET
The quirks of the calendar have delivered a week that has little fresh economic data. Some will use the quiet period to continue the discussion of politics and the debt ceiling. Others will focus on predictions for the coming year.
Most are tired of "the cliff" and will be happy to turn to a new subject: It's time for earnings!
This earnings season will be especially important. Here are two key reasons:
- Forward earnings estimates are at an all-time high. The oft-repeated pundit opinion is that analyst estimates are excessive and must be reduced.
- The January earnings season often includes full-year guidance. This is always interesting, but perhaps even more so right now.
Both of these intriguing ideas come from my Chicago-based friend Brian Gilmartin, who is among the very best sources on corporate earnings. He sees the forest, since he has tracked the ThomsonReuters estimates for over a decade. He notes trends in these estimates as well as revisions by sector, most recently with My research shows that this occurs at about one year in advance.
To summarize: This earnings season will be important for estimate revisions as well as the current "beat rate."
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