'Better-than-expected' has lost its meaning 🤷🏻‍♂️

What to expect when you're expecting better-than-expected

We’re in the midst of Q3 earnings season, the period when big companies reveal their financial performance during the three months ending in September.

Through Friday, 280 of the S&P 500 companies had reported their Q3 results. A whopping 83% “beat expectations” for earnings, according to Deutsche Bank.¹

That sounds good. But what does it actually mean when earnings are better than expected?

When you look at the history of analysts’ expectations versus actual results, you’ll find that beating expectations is not special. Even worse, the mere existence of quarterly expectations may incentivize all kinds of unsavory short-term behavior.

Companies are expected to ‘beat expectations’