Earnings Surprise (Beat & Miss)

An earnings surprise is the difference between a company actual results and what analysts expected. Reporting above expectations is a beat, while falling short is a miss. Because stock prices already reflect expectations, the surprise often drives the immediate reaction more than the absolute numbers.

Watch both the size of the surprise and the market reaction, which can be counterintuitive: a stock may fall on a beat if guidance disappoints or expectations were sky-high. Look at the trend of beats or misses over several quarters to gauge how well management forecasts and executes. Avoid reading too much into a single quarter.

Analysts expect earnings of 1.00 dollar per share and the company reports 1.15 dollars, a 15 percent beat. If guidance is also strong, the stock may jump, but if management warns of slowing demand, it could fall despite the beat.