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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: MARK BARGER who wrote (43906)	1/19/1999 9:26:00 AM
From: RealMuLan	Respond to of 132070

This is from Briefing.com: 08:50 ET****** EARNINGS WEEK. Fasten your seatbelts, earnings week is here. Starting today, there are numerous key earnings releases. Today after the close, Microsoft is due to report. Wednesday before the open Texas Instruments is due, and after the close Wednesday are heavily traded Internet companies AtHome and Doubleclick. On Thursday, expect Lucent before the open and IBM after the close. But that is just the tip of the iceberg, as the list on the earnings calendar for this week is extremely long, and next week is just as heavy. The key for individual stocks during this earnings season is how a company reports earnings relative to published Wall Street forecasts. If a company beats the average estimate, the plaudits abound. If they miss, the stock can take a drubbing. This Pavlovian response on the part of traders has produced a predictable reaction by companies. Companies have learned not to let earnings come in below the published estimates. They have learned that it is important to either pre-announce earnings disappointments (but that too can lead to a stock drubbing) or better yet, to simply "guide" Wall Street numbers by quietly letting analysts know that current estimates are too high. This works. As Briefing.com has repeatedly show, twice as many companies each quarter report earnings above the published estimates as report below the estimates. This has happened when earnings were rising 15% on a year-over-year basis, and even in the most recent quarter (third quarter), when operating earnings posted a decline. Last quarter, Wall Street was estimating a 7% increase in operating profits a month ahead of earnings reports, but twice as many companies still ended up beating estimates as missing, even though operating earnings ended up -3%. This quarter, earnings estimates were as high as 9% on a year-over-year basis for the S&P 5000 companies just a few weeks ago, but now estimates have dropped to about 3%. Once again, Wall Street has quickly, and quietly, brought estimates down without harming the market. This is how the game is played. Now, most companies can beat the published estimates, if only by a penny, and receive a positive reaction from Wall Street, no matter what estimates might have been a month ago, or what the year-over-year change in profits is. They key is to watch what kind of reaction occurs to early earnings reports - how much does a stock move if it reports the classic "penny ahead of expectations." If the early reactions are good, it suggests the market could be poised to react favorably to the overall reports, as it is almost certain that the majority of companies will once again beat estimates.