We're more than halfway through the current earnings season, and 300 of the companies in the Standard & Poor's 500 have reported their earnings. As a historical matter, companies tend to exceed their earnings estimates, with 62 percent of companies beating the analysts' estimates over the past ten years. But this quarter has been even stronger than normal - 70 percent of reporting companies have beaten estimates.
Since most companies do beat their estimates, there is generally much more of a penalty for missing than there is a reward for those who outperform. Alliance-Bernstein Investments has quantified the effects of this for the current quarter. S&P 500 companies that beat their estimates outperformed the overall S&P 500 by just 0.9 percent on the three days surrounding the day of the earnings report.
On the other hand, companies that fell short suffered a much bigger penalty. Those stocks that missed their earnings estimates ended up lagging the index by 4.1 percent on the days around their earnings reports.
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