Chart of the Day – Earnings and Revenue Beat Rates

by Enis August 6, 2012 11:40 am • Commentary

The insightful team at Bespoke had another solid graphic at the end of last week that compared the earnings and revenue beat rates of this earnings season vs. the past 11 years.  With the bulk of earnings reports out of the way, how does this quarter compare?

Here is the earnings beat rate:

 

 

No big surprise here, as the earnings beat was around the average of the past.  How about the revenue beat rate though?  Much more abnormal here:

 

 

4th worst reading in the entire data set, with the other 3 all during recessions.  Of course, in the short-term, what matters more than the actual data is the interpretation of the data.  And for now, the market’s reaction implies that investors and traders are either confident that this quarter was a one-month blip or that they are ignoring this longer-term warning sign in trading the short term up move.

The earnings data has historically been in a tighter range, in large part in my view due to the game corporates play 0n the accounting side to try and meet consensus estimates with various levers.  Revenue data is harder to game, and more volatile in beating or missing estimates as a result.

The market currently does not care though.  Weak corporate results relative to the past 3 years has been part of my bearish bias.  The weak revenue is likely to matter again.   How soon is the question.