Any sell-side analyst that started in the business after the year 2000 has to have an entirely different view of volatility than the analysts that were around in the 1980s or 1990s.
Here is the “EPS estimate revision” spreadsheet that I post to this blog occasionally: FC-eps estimate revisions.
Thinking about this blog post of a few weeks ago, in the above spreadsheet, note how the first quarters of each of the past 3 years, 2014, 2015, 2016, had no earnings weeks above 50% in terms of estimate revisions (spreadsheet lines 11, 64 and 115). But then note how after the Q4’s earnings were reported and we progressed into the first and 2nd quarters, the estimate revisions turned a little more positive. (Source: Thomson Reuters estimate revision data)
Were management too conservative and pessimistic with their full-year guidance after reporting Q4 earnings each of the past three years ? Were analysts too conservative with their full-year numbers, trimming numbers and being too careful ? Did the S&P 500 correction in each of the past January – Februarys in 2014 (Ukraine and Venezuela), 2015 (West Coast port slowdown, strong dollar) and 2016 ($26 crude oil and widening credit spreads), cause analysts to pull in their horns?
Yes, this is navel gazing and “inquiring minds want to know” kind of thinking, but the revisions data is there in black and white.
Each “black box” so to speak highlights the bulk of the earnings reporting season for the S&P 500.
For some reason, revisions are more negative than positive in the first quarter of each of the last three years, only to get more positive after Q1 earnings.
We’ll see if the pattern repeats for Q1 ’16 earnings.
To answer the headline question, “How can they not be?”