The short version
Every three months, US public companies report how their last quarter went. Late October is one of the busiest stretches of the year for these reports.
What does it mean when a company beats earnings?
A company “beats” when the profit or revenue it reports comes in above the average forecast from the analysts who follow it. A “miss” means it came in below. It’s a comparison with expectations, not a verdict on the business.
The three numbers to watch
Revenue: the money a company brought in from sales. Earnings per share (EPS): profit divided by the number of shares. Guidance: the company’s own forecast for what comes next. Not every company gives one.
Why do stocks fall after beating earnings?
Prices already reflect what investors expect. If a beat was smaller than hoped, or guidance came in light, the stock can drop the same day. Big one-day swings around reports are common.
What it means if you invest for the long term
One report is one data point, for one company, and one company’s news isn’t the whole market. You don’t have to react to every headline. We don’t predict who will beat or miss, and nothing here is a recommendation to buy or sell any security.
Vantar Markets is for informational purposes only and is not investment advice or a recommendation to buy or sell any security. [Disclosure: Elizabeth’s library]