earnings revisions

Changes to the consensus earnings estimate for a stock, which reflect changes in expectations of future performance. Revisions made by analysts to earnings estimates lead to price adjustments similar to earnings surprises. When earnings estimates are revised significantly upward—5% or more—stocks tend to show above-average performance. Stock prices of firms with downward revisions show below-average performance after the adjustment. Revisions are often precursors to earnings surprises. As the reporting period approaches, estimates normally converge toward the consensus. A flurry of revisions near the reporting period can indicate that analysts missed the mark and are scrambling to improve their estimates.