Investors play the expectations game

Bob Moon Jul 8, 2009
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Investors play the expectations game

Bob Moon Jul 8, 2009
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Stacey Vanek-Smith: To everything there is a season, and today kicks off a new earnings season for U.S. companies. Alcoa will be the first company on the Dow index to report quarterly profits. Of course, most companies have been hammered by the recession. But for Wall Street investors, it’s not so much about the losses — it’s about how well companies can play the expectations game. Our senior business correspondent, Bob Moon, has more.


Bob Moon: For the most part, business executives have been offering a relatively bleak outlook, and that’s caused analysts to set their sights low. So even a slide in profits could be viewed as a positive sign — so long as the news isn’t awful.

Ted Weisberg is head of Seaport Securities. He says Wall Street hates nasty surprises, so the trick is managing expectations in the opposite direction:

Ted Weisberg: Where things are not as bad as anticipated. Now, whether or not everything is purposely being guided more negative than in fact it is, I guess we’ll never know the answer to that.

At Fort Pitt Capital Group, chief investment officer Charles Smith has his own set of expectations. He says corporate America has been focused on cutting costs, so it ought to have something to show for that:

Charles Smith: The bright side of 500,000 or 600,000 jobs lost every month is that earnings are going to be better than people expect.

That’s provided, of course, that the weeks ahead don’t end up living down to expectations.

I’m Bob Moon for Marketplace.

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