Street Expectation

Definition of 'Street Expectation'


The average estimate of a public company’s quarterly earnings and revenues, derived from forecasts of securities analysts who provide research coverage on the company. The Street expectation is a closely watched number that assumes prominence during the period when most public companies report their results. The term is derived from the fact that analysts of the biggest brokerages are typically based on Wall Street in the U.S. and Bay Street in Canada. “Street expectation” is also known as “earnings estimate” or “earnings expectation”. Another synonym, “consensus estimate", is seldom used nowadays.
 

Investopedia explains 'Street Expectation'


Investors’ reaction to a company that misses Street expectations is often negative and can trigger a substantial decline in the stock. Conversely, a company that beats expectations can generally expect to be rewarded with an appreciation in its stock price.

A company needs to beat the average analyst forecast for both sales and earnings per share (EPS) – or the top-line and bottom-line – to exceed Street expectations. A miss on either the average revenue number or EPS forecast would count as falling short of expectations.

Factors that influence the magnitude of price movement in the underlying stock when a company exceeds or misses Street expectations (also known as a positive or negative “surprise”, respectively) include the extent of the surprise, the overall market trend (bullish or bearish) and the company’s outlook for the period ahead.

In broad terms, the bigger the surprise, the bigger the market reaction. The reaction to negative surprises is typically more adverse than the favorable reaction to positive surprises. This means that a stock is generally likely to suffer a greater percentage decline if it misses expectations by a wide margin, compared to the percentage gain that can be expected if it exceeds estimate by a similar margin.

In addition, during a strong bull market, stocks that beat expectations surge in price. During a dismal bear market, stocks that miss expectations endure precipitous price declines, while stocks that beat expectations record muted gains.

Market reaction to an earnings hit or miss can also be dictated by the company’s outlook. The negative reaction to an earnings miss may be tempered by a strong outlook, while the positive reaction to an earnings beat may be negated by a poor outlook.

 



Related Video for 'Street Expectation'

comments powered by Disqus
Hot Definitions
  1. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
  2. Jeff Bezos

    Self-made billionaire Jeff Bezos is famous for founding online retail giant Amazon.com.
  3. Re-fracking

    Re-fracking is the practice of returning to older wells that had been fracked in the recent past to capitalize on newer, more effective extraction technology. Re-fracking can be effective on especially tight oil deposits – where the shale products low yields – to extend their productivity.
  4. TIMP (acronym)

    'TIMP' is an acronym that stands for 'Turkey, Indonesia, Mexico and Philippines.' Similar to BRIC (Brazil, Russia, India and China), the acronym was coined by and investor/economist to group fast-growing emerging market economies in similar states of economic development.
  5. Pension Risk Transfer

    When a defined benefit pension provider offloads some or all of the plan’s risk – e.g.: retirement payment liabilities to former employee beneficiaries. The plan sponsor can do this by offering vested plan participants a lump-sum payment to voluntarily leave the plan, or by negotiating with an insurance company to take on the responsibility for paying benefits.
  6. XW

    A symbol used to signify that a security is trading ex-warrant. XW is one of many alphabetic qualifiers that act as a shorthand to tell investors key information about a specific security in a stock quote. These qualifiers should not be confused with ticker symbols, some of which, like qualifiers, are just one or two letters.
Trading Center