Equity investors are all attentive before an earnings release. This is because earnings apparently indicate a company’s financial health. No wonder, solid earnings growth speaks about business well-being, but there is another metric which is gaining attention lately, i.e. positive earnings surprise or earnings beat. Let’s tell you why it is so important.
What is Earnings Beat?
Investors always try to position themselves ahead of time and look for stocks that are likely to come up with a stellar performance. After much brainstorming, Wall Street analysts project earnings of companies. These estimates act as investment leads.
A positive earnings surprise or earnings beat is typically the case when actual or reported earnings come in above the consensus estimate. Historically, if a company’s earnings manage to beat market expectations, its stock surges post release.