Earnings Estimate

What is an 'Earnings Estimate'

An earnings estimate is an analyst's estimate for a company's future quarterly or annual earnings. Future earnings estimates are arguably the most important input when attempting to value a firm. By placing estimates on the earnings of a firm for certain periods (quarterly, annually, etc), analysts can then use cashflow analysis to approximate a fair value for a company, which in turn will give a target share price for publicly traded companies.

BREAKING DOWN 'Earnings Estimate'

Analysts use forecasting models, management guidance and fundamental information on the company in order to derive an estimate. Market participants rely heavily on earnings estimates to gauge a company's performance when announcing quarterly or annual results. The analysts' earnings estimates are used as a benchmark to measure a firm's performance relative to how experts expected it would do.

RELATED TERMS
  1. First Call

    A company that gathers research notes and earnings estimates ...
  2. Consensus Estimate

    A figure based on the combined estimates of the analysts covering ...
  3. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. ...
  4. Guidance

    Information that a company provides as an indication or estimate ...
  5. Discounted Future Earnings

    A method of valuation to estimate the value of a firm.
  6. Rolling EPS

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

    What are Earnings?

    The amount of profit that a company produces during a specific period, which is usually defined as a quarter (three calendar months) or a year.
  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

    IBM Stock: An Earnings Case Study

    Learn the main drivers behind IBM's earnings model and why analysts predict a decline in 2016 followed by a strong recovery in 2017.
  6. 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.
  7. 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.
  8. Personal Finance

    Everything Investors Need To Know About Earnings

    We go over the concepts behind the excitement over the most important figure in the stock market.
  9. Managing Wealth

    How to Use Earnings Season to Make Better Decisions

    Earnings season reflects the state of the stock market, but also demonstrates how the overall economy is performing.
  10. Managing Wealth

    Valuing Private Companies

    You may be familiar with publicly-traded companies, but how much do you know about privately-held firms?
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. 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 >>
  3. 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 >>
  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. What can I learn about a company by studying its earnings report?

    Find out how to review an earnings report by looking for key information about cash flow and margins, and discover the importance ... Read Answer >>
  6. When is earnings season?

    Earnings season is the period of time during which a large number of publicly traded companies release their quarterly earning ... Read Answer >>
Hot Definitions
  1. Put Option

    An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security ...
  2. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  3. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  4. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  5. Diversification

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

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
Trading Center