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Winning Investors Over: Surprising Truths About Honesty, Earnings Guidance, and Other Ways to Boost Your Stock Price by Baruch Lev

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Chapter 1

It’s Not the End of the World

What to Do—and Not Do—When Faced with Missing the Consensus Earnings Estimate

In This Chapter

  • Why a one-penny miss of the consensus is so deleterious.
  • What factors determine investors’ reaction to companies’ results.
  • Why high-growth companies that disappoint investors are hit hard.
  • What actions managers can take to avoid a consensus miss, and its consequences.
  • What course mitigates investors’ response to disappointments.

On June 26, 2007, the Kroger Company reported a 10 percent rise in first-quarter profits. The supermarket chain’s shares, however, fell 4.7 percent (the S&P 500 rose 0.6 percent).1 What gives? Kroger’s EPS, coming at $.47, missed the analysts’ consensus earnings estimate by a penny—the ...

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