Heinz Blasnik- Views You Can Use Message Board

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Strategies & Market Trends : Heinz Blasnik- Views You Can Use

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To: zonder who wrote (1194)	5/13/2003 10:25:38 AM
From: Mike M2	Read Replies (2) of 4907

Zonder, some years back there was a well known academic study that found that companies that beat earnings estimates out performed the general market. ( don't ask me the name -I don't know but I have seen it referenced in my readings over the years). The study covered the pre-bubble years when analysts were more objective not quasi sales/marketing men for investment bankers. I recall in July 1996 IBM reported $2.51 for 2Q96 - beating the estimate by one penny. The reported was widely celebrated but few noticed that the estimate was for $3.25 at the beginning of the quarter. Today on CNBS many reports are simply compared to the estimate with no mention of the rate of change from year ago levels. When some tech companies were reporting big gains from their investments the media did not bother to differentiate between earnings from continuing operations and non recurring events- although Wall St would have the public believe that earings could grow faster than revenues in perpetuity. The effect of such tactics and accounting shenanigans was to mislead the public about the true earning power of corporations. Mike

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