what is an earnings estimate 
an earnings estimate is an analyst s estimate for a company s future quarterly or annual earnings per share eps future earnings estimates are arguably the most important input when attempting to value a firm by placing estimates on the earnings of a firm for certain periods quarterly annually etc analysts can then use cash flow analysis to approximate fair value for a company which in turn will give a target share price investors often rely on earnings estimates to analyze different stocks and decide whether to buy or sell them understanding an earnings estimateanalysts use forecasting models management guidance and fundamental information on the company to derive an eps estimate market participants rely heavily on earnings estimates to gauge a company s performance so whether a company meets beats or misses its earnings estimates can impact the price of the underlying stock particularly in the short term analysts earnings estimates are often aggregated to create consensus estimates these are used as a benchmark against which the company s performance is evaluated when you hear that a company has missed estimates or beaten estimates it s usually in reference to consensus estimates a few companies such as refinitiv and zacks investment research compile estimates and compute the average or consensus their forecasts can be found in stock quotations or financial publications such as the wall street journal consensus numbers can also be found at a number of financial websites such as yahoo finance bloomberg visible alpha morningstar com and google finance published consensus earnings estimates frequently are reflected in the stock price of a company but sometimes they have an adverse effect the shares of firms with high earnings estimates tend to falter as the companies performance doesn t live up to the market s expectations they can easily disappoint conversely firms with low earnings estimates tend to perform better than anticipated because of the low bar they ve nowhere to go but up 1example of an earnings estimateearnings estimates are found by looking up individual stocks take for example amazon amzn here is a roundup of its consensus earnings estimates as of jun 7 2021 special considerationsearnings surprises occur when a company misses the consensus estimate either by earning more than expected or less if the firm manages to beat the earnings estimate it is called a positive or upside surprise if the firm fails to reach the earnings estimate it is called a negative surprise here is how amazon s performance vis vis surprises has worked out over 2020 2021 ytd as with the earnings estimates themselves earnings surprises affect stock prices it s been found that the stocks of firms with substantial positive earnings surprises tend to perform above average and the stock prices with substantial negative earnings surprises perform below average 1as a result companies often manage their earnings carefully to ensure that consensus estimates are not missed companies that consistently beat earnings estimates outperform the market so some companies set expectations low by providing forward guidance that results in consensus estimates that are low relative to likely earnings this results in the company consistently beating consensus estimates and the earnings surprise becoming less and less surprising 