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Technology Stocks : MRV Communications (MRVC) opinions? -- Ignore unavailable to you. Want to Upgrade?

To: dave g who wrote (6969)	2/4/1998 11:57:00 PM
From: Eric L.	Respond to of 42804

Oops!Market Features: First Call Error Overstated First-Quarter Views By Justin Lahart Staff Reporter 2/4/98 1:38 PM ET The discovery of a major error in data from First Call, the firm that most of Wall Street relies on for consensus earnings estimates, may make the market's outlook a lot brighter. In December, First Call estimates for the first quarter of 1998 showed that company analysts expected earnings growth of better than 17% for the S&P 500, compared with the year-ago period. As recently as last week, the growth estimate stood at nearly 13%. That contrasted sharply with the views of Wall Street strategists, whose top-down estimates called for S&P 500 earnings to grow less than 10%. Many on Wall Street worried that analysts were being far too sanguine about company estimates and that numbers would need to be slashed, hurting stocks. First Call director of research Chuck Hill himself told TheStreet.com on Dec. 15, "I think you've got to be looking over your shoulder pretty damn hard on whether we're going to have more than the normal negative revisions in the first quarter." But it turns out those First Call estimates were wrong. Last week, Morgan Stanley Dean Witter strategist Scott Reed found that First Call mistakenly used a full-year estimate for Royal Dutch Petroleum (RD:NYSE ADR) for the company's first-quarter estimate. Because Royal Dutch, with a market cap of $113.2 billion, is the sixth-largest component in the S&P 500, the error made for a huge inflation in first-quarter growth estimates for the market-weighted index. "That company alone is such a large component of the S&P 500 index that when you adjust it to make it correct, there's a massive swing from around 13% to 6%," explains Reed. "It's not the first time something like this has happened, but it's the first time, to my knowledge, that something like this has caused such a major revision." Reed says he told First Call about the mistake. "We really regret this error," says First Call PR manager Faye Fradshisheh, who explains that one of First Call's contributing brokers made an input error. "We started reviewing all of the existing quality control tests and we are making assurances that this doesn't happen again." (Fradshisheh would not confirm or deny that Royal Dutch's earnings were the source of the error. First Call will only say that the estimate error was in one of the top 10 companies in the S&P 500.) First Call consensus estimates now are for the S&P 500 first-quarter earnings growth to come in at 6.2%, revised from the mistaken estimate of 12.6%. So company analysts have, after all, factored in expectations of slower growth into their 1998 first-quarter estimates. The market does not face the huge estimate revisions that some people feared. "This was one of the things that was bothering me," says Peter Canelo, U.S. investment strategist at Morgan Stanley. "I was thinking, 'Jeez, these analysts are going to have to cut their estimates a lot.' Maybe they aren't now. This is really bullish." c 1998 TheStreet.com, All Rights Reserved. Maybe a little bull will help MRVC as lots of things seem to be breaking right for it as earnings approach? later eric