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Capitalizing on Earning Surprises with Intraday Updates

Earnings

By Lauren Stevens  |  August 4, 2016

When companies report earnings surprises, the ability to strike quickly is critical to capitalizing on market reactions. Analysts need to be vigilant of their estimates for the same reason, providing recalibrations that ensure the best possible insight as quickly as possible. At the same time, traders, portfolio managers, and analysts need to know when these estimates change, and why.

Detail Orientation 

At 5 p.m. on July 26, Apple posted a positive earnings surprise of 2% in its Q2 report. By 8:30 p.m., eight analysts had made earnings estimate adjustments, by midnight another 20 estimate changes had been made, and at 1:08 a.m. the following morning, Mizuho Industries revised their Apple EPS estimate for Q4 by +18.71% — the largest recalibration in the 24 hours following the release.

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At roughly the same time, Twitter posted a negative earnings surprise of -.09%. As with Apple, estimate adjustments followed shortly after, and between the announcement and midnight that same day, well over 40 analyst estimates for Twitter had been altered.

Related: S&P Now Reporting Revenue Growth for Q2

The positive surprise reported by Apple (unsurprisingly) resulted in upward adjustments for most estimates, but not all. Likewise, for Twitter, while the vast majority of estimates were lowered in light of Q2’s negative surprise, certain analysts saw positive signals within the company’s earnings release. Macquarie Research, for example, adjusted its EPS estimate for Twitter’s Q3 performance by +195.9%, citing improved engagement data and updates to ad products and services in the corresponding research.

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While consensus data may offer a baseline for decision making, understanding the nuances of individual analyst estimate changes can be just as critical as general sentiment. If an analyst or brokerage house that a portfolio manager has come to rely on has an outlier opinion, access to those details may be as important as the dozens of opinions that follow the direction of a surprise. 

The Criticality of Intraday Updates

Information on a company’s market perception is only as up-to-date as the system delivering it. In the case of Apple and Twitter, it may be reasonable to expect markets will move in accordance with the previous day’s earnings surprises; but a deeper understanding of “why” is dependent on the available analyst research. 

An investment platform with intraday estimate updates ensures that changes are delivered promptly. FactSet’s Estimates Data Feed for example, provides estimate changes six times a day.

Having access to the analyst estimate adjustments you care about (especially ones that buck a trend) can be crucial to an investment strategy. Intraday updates provide access to such recalibrations faster, freeing up time to digest and apply newly found insights that may not have been available otherwise.

The financial world moves quickly. When empowered with complete and punctual data, investment professionals can fill gaps in their market awareness just as quickly.

Lauren Stevens

Senior Director, Content & Technology Solutions

Lauren joined FactSet in 2006 as a Consultant. She is responsible for analyzing market research and determining the direction of the FactSet content, cloud, and technology strategy. In 2013, she joined the Content & Technology Solutions team. Lauren earned a B.S. in Policy Analysis from Cornell University.

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