Consensus Estimate

What is a 'Consensus Estimate'

A consensus estimate is a figure based on the combined estimates of the analysts covering a public company. Generally, analysts give a consensus for a company's earnings per share and revenue; these figures are most often made for the quarter, fiscal year and next fiscal year. The size of the company and the number of analysts covering it will dictate the size of the pool from which the estimate is derived.

BREAKING DOWN 'Consensus Estimate'

When you hear that a company has "missed estimates" or "beaten estimates", these are references to consensus estimates. Based on projections, models, sentiments and research, analysts strive to come up with an estimate of what the company will do in the future.

Obviously, consensus estimates are not an exact science. This leads some market pundits to believe that the market is not as efficient as often purported, and that the efficiency is driven by estimates about a multitude of future events that may not be accurate. This might help to explain why a company's stock quickly adjusts to the new information provided by quarterly earnings and revenue numbers when these figures diverge from the consensus estimate.

RELATED TERMS
  1. Earnings Estimate

    An analyst's estimate for a company's future quarterly or annual ...
  2. First Call

    A company that gathers research notes and earnings estimates ...
  3. Estimated Current Return

    The estimated return for a unit investment trust over the short ...
  4. Rolling EPS

    A measure of a company's earnings per share based on the previous ...
  5. Guidance

    Information that a company provides as an indication or estimate ...
  6. Institutional Brokers' Estimate ...

    A system that gathers and compiles the different estimates made ...
Related Articles
  1. Markets

    Strategies For Quarterly Earnings Season

    Breeze through consensus estimates like the biggest Wall Street forecasters.
  2. Investing

    Earnings Forecasts: A Primer

    Learn how this key metric is calculated and how it is used to judge market performance.
  3. Investing

    3 Suggestions Before Reading Analyst Stock Recommendation

    Discover the true motivations and priorities of sell-side analysts and why individual investors should ignore consensus estimates for earnings and revenues.
  4. Markets

    UPS Stock: An Earnings Case Study

    Check out the analysis of earnings for United Parcel Service, including historical earnings, past analyst estimates and future analyst estimates.
  5. Markets

    S&P 500: Companies Continue to Report Revenues Below Estimate

    Discover why companies are missing revenue estimates but clearing their earnings estimates, and what that might mean for an inflated market.
  6. Investing

    3 Things to Know Before Taking Sell Side Recommendations

    Learn about the equity research process to understand the incentives faced by published research analysts. How should investors rate analyst estimates?
  7. Markets

    Big Banks In The Spotlight As New Earnings Season Begins

    The first-quarter earnings reporting season kicks off this week. Among the first companies to share their results will be the big U.S. banks. Wall Street analysts are looking for shrinking earnings ...
  8. Markets

    Pre-Merger Earnings Expectations For Rite Aid, Walgreens And Bed Bath & Beyond

    Two merging drug store giants are scheduled to share their latest earnings reports this week. Wall Street consensus forecasts see earnings growth from just one of them. A domestics superstore ...
  9. Investing

    Wal-Mart Stock: An Earnings Case Study (WMT)

    Examine Wal-Mart's earnings history and outlook. Analyze financial data to determine which factors are driving performance and influencing analyst estimates.
  10. Investing

    The Impact Of Sell-Side Research

    Sell-side analysts are not stock buyers or sellers - rather, they provide unbiased guidance to traders.
RELATED FAQS
  1. What happens if a company's earnings fall short of estimates?

    Understand what it means when a company "misses earnings" and does not live up to consensus estimates, and learn why most ... Read Answer >>
  2. What is the first day of the first quarter?

    The first day of companies' fiscal years varies based on industry cycles. The timing is especially important because annual ... Read Answer >>
  3. When does Q4 start and finish?

    Learn about different financial years used by various companies. Explore when the fourth quarter begins on October 1st and ... Read Answer >>
  4. What is a quarterly report?

    Learn about quarterly reports and why they are important to investors. Explore street consensus estimates and how reported ... Read Answer >>
  5. When does a business report gross margins?

    Learn how gross margins are calculated and when publicly traded companies release these figures. Explore consensus street ... Read Answer >>
  6. How do companies calculate the estimated duration of a new project?

    Learn about some of the common methods used by companies to estimate the duration of a new project, including those with ... Read Answer >>
Hot Definitions
  1. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  2. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  3. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  4. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  5. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  6. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
Trading Center