Definition
An earnings surprise occurs when reported earnings differ from analyst consensus expectations. Positive surprises (beats) typically lift stock prices; negative surprises (misses) cause declines. The market reaction depends on surprise magnitude, quality of earnings, and guidance. Post-earnings drift often continues the initial reaction direction.
Formula
Earnings Surprise % = (Actual EPS - Consensus EPS) / |Consensus EPS| × 100%
Example
Analysts expected $1.00 EPS; company reports $1.15 - a 15% positive surprise, likely boosting the stock.
FAQ
What is Earnings Surprise?
The difference between actual earnings and the consensus estimate.
How do you calculate Earnings Surprise?
A common formula for Earnings Surprise is: Earnings Surprise % = (Actual EPS - Consensus EPS) / |Consensus EPS| × 100%
Why is Earnings Surprise important?
Earnings Surprise helps investors evaluate fundamental analysis and make more informed decisions.