When journalists write that a company has ‘missed’ or ‘beaten’ estimates they refer to the consensus estimate. The consensus estimate is a figure based on aggregated estimates of the analysts covering a listed company.
Use of consensus estimate information
While some analysts publicly announce their estimates or make them available to newswires such as Bloomberg and Dow Jones, many banks and brokers have a policy to not share their estimates with the general public.
Newswires will make their own consensus estimate based on the available estimates as well and report these consensus numbers before results are published. When the actual results are then published, the wire can quickly assess if the reported revenue and earnings are in line or above or below the analysts’ expectations.
Importance of awareness
It is also important for the IRO to know the expectations of the analysts covering the company.
To obtain that information, an IRO can ask the various analysts that cover the company to provide their estimates by email several weeks before the publication date of the results. The IRO can then provide the consensus estimate in return.