It appears as if investors have become very aware of the way companies play the expectations game, managing their earnings forecasts so as to ensure they outperform come earnings season. In the current earnings season, stocks that beat their Wall Street consensus are getting very little reward for it. Companies that beat earnings are outpacing the S&P 500 by an average of just 0.9 percentage points on the day of their reports, according to a report from Goldman Sachs. That's a marked difference from last quarter, when outperforming companies got a boost of 2.9 percentage points over the S&P 500 on the day they announced their earnings.
At the same time, they're being punished a bit more for missing expectations. Companies that have fallen short of the consensus have slid by 3.6 percentage points compared to the S&P; last quarter, that same figure was 3.2 percentage points.
McDonald's illustrates what's been happening. The Golden Arches came in last month with a weaker than expected earnings report, on a day when the S&P as a whole fell by 1.7 percent. But McDonald's stock slipped that day by more than twice as much, at a loss of 4.5 percent.
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