DJIA Earnings Reports Are In – No Sign of Over-Optimism

Wednesday, May 19, 2010

In late March, just before the first quarter earnings reports came in, there was worry that companies and analysts had become overly optimistic. The symptom cited was less trimming of estimated earnings before the actual reports.

On March 31, I addressed the issue in “Earnings Reports Coming – What Does Less Trimming Mean to Investors?” My thought was that, given that other optimistic signs were not evident, the reduced trimming could be an indicator of even better earnings.

That seems to be the case. There have been articles written about the large proportion of companies reporting better-than-expected earnings (i.e., “positive surprises”). Here are the results for the Dow Jones Industrial Average companies, the last of which reported earnings yesterday (Tuesday, May 18).

Note two items:

  1. Only three companies (10%) reported negative surprises
  2. The median (mid-point) result was a healthy 9% positive surprise

Also, all results are now positive – no negative earnings reports, nor are any forecast.

So…  Many corporations produced good earnings during 2010’s first months. Next, we will look at the consensus forecasts for 2010 and beyond.

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