• An earnings estimate is an analyst’s forecast of a public company’s future quarterly or annual earnings per share (EPS).

  • Investors rely heavily on earnings estimates to evaluate a company’s performance and make investment decisions.
  • Most investors use a consensus earnings estimate, i.e. a forecast of a public company’s projected earnings based on the combined estimates of all equity analysts that cover the stock.
  • Whether a company meets, exceeds or falls short of its earnings estimates can affect the price of the underlying stock, especially in the short term.
  • Earnings surprises occur when a company fails to meet the consensus forecast, either earning more than expected or less.