Do Analysts Say Anything About Earnings Without Revising Their Earnings Forecasts?
Berger, Philip G., Ham, Charles G., Kaplan, Zachary R.
The Accounting Review · 2019 · Volume 94 · Issue 2
Abstract
Analysts are selective about which forecasts they update and, thus, convey information about current quarter earnings even when not revising the current quarter earnings (CQE) forecast. We find that (1) textual statements, (2) share price target revisions, and (3) future quarter earnings forecast revisions all predict error in the CQE forecast. We document several reasons analysts sometimes omit information from the CQE forecast: to facilitate beatable forecasts by suppressing positive news from the CQE forecast, to herd toward the consensus, and to avoid small forecast revisions. We also show that omitting information from CQE forecasts leads to lower forecast dispersion and predictable returns at the earnings announcement.
Keywords
sell-side analysts, analyst incentives, earnings forecasts, forecast bias
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