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CORPORATE EARNINGS FORECAST

We can help you become proactive by providing you with a reliable forecast for the EPS (earnings per share) of a given stock.

FCE (Forecasting Corporate Earnings) delivers accurate and unbiased estimates for EPS for US corporations. Wall Street's estimates are a consensus estimate, which are biased and they systematically underestimate the actual corporate earnings. This bias is attributed to human and statistical shortcomings. 

Our earnings forecast will alert you with a possible earnings surprise (positive or negative) and will let you protect or increase your investment prior to the official earning announcement (of a given stock). 

For each stock, we identify the optimal forecasting model after evaluating over 100 different competitive models. We use all the historical data available (on the average 20-25 QTR) for a given stock.  In addition, each model is validated by examining the accuracy of the forecast with the actual for all the historical EPS data available and the accuracy of the forecast for the last 4 QTRs (we exclude the last 4 QTRs in the model development and use these data points only for validation). 

 

FORECASTING METHOD - USED FOR GOOGLE for Q3 in 2011

Our forecast on GOOGLE for Q3 2011: Wall Street's consensus estimate was $8.74. Our optimal forecasting model produced an estimate of $9.61 per share with a low forecast of $9.13 and high of $10.09. Given that Wall Street's estimate was even lower than our conservative low estimate, we identified this situation as a good risk/reward investment opportunity.

We purchased short term call options on Google prior to their Q3 earnings announcement. Our surprise positive forecast was correct and the actual earnings came out to be $9.72 and we made $43 per share.

To receive a forecasting report for GOOGLE, please send us an email requesting it. Did you the Barron's article about us?

 

ANOTHER FORECASTING METHOD - USED FOR IBM Q3-2011-Q4-2012

The table below presents the EPS forecast which was $3.30 for IBM for the Q3 in 2011. The low range of the forecast was $3.05 and the high range was $3.56. We were confident at 95% that the actual EPS was to be in this range. The actual value was $3.28 and the Wall Street estimate was $3.22. Our forecast came closer to the actual.

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The above forecast was derived after testing several hundred possible models. The model's accuracy is determined by using withholding data points for the previous 4 QTR - Q3-2010 to Q2-2011; these data are not used in the forecasting model.

 

 

 

 

 

The historical data (time series of EPS data) used to calculate the forecast is shown in the graph below (last several data points in this graph are the forecasts given in the table above).

This chart demonstrates that IBM had significant seasonal variations in its business (confirmed also by our forecasting model). Accounting research, a major tool used by Wall Street, resulted in a consensus estimate.  They did not accurately estimate the seasonal impact for IBM or for any other companys' business. Our model accurately estimates such impact.