So the long awaited earnings season is upon us and overall the market is holding up rather well. Earning either miss, meet or exceed expectations. Surprisingly many companies are exceeding expectations, even though the last quarter had been extremely challenging. But does missing, meeting or exceeding earnings expectation constitute good earnings?
On Thursday April 23rd, 2009 Microsoft released earnings that met expectations. Expectations were for 39 cents (excluding 6 cents in charges) a share which they met. Year over year earnings fell 32% from the same period last year. 60 days ago earnings estimates were for 40 cents a share.
On Thursday April 23rd, 2009 American Express released earning which exceeded expectations. Expectations were for 12 cents a share and they reported 31 cents a share. Year or year earnings fell 56% from the same period last year. 60 days ago earnings estimates were for 28 cents a share.
On Thursday April 23rd, 2009 Amgen reported earnings which missed expectations. Expectations were for $1.15 a share and they reported $1.08 a share. Year over year earnings fell 4% from the same period last year. 60 days ago earnings estimates were for $1.16 a share.
All three companies’ earnings are down year of year. The company who exceeded expectations actually saw the largest decrease in earnings year over year. The company who missed expectations saw the smallest decline in earnings year over year.
What are more important, expectations or actual earnings? Earnings are the product of companies; expectations are the product of Wall Street. In the above examples the expectations seemed to give the assumption that the company whose earnings are down the most year over year is doing better than the other two examples. What do you think?
