About a month ago, before Canadian earnings season began, we put together a collection of 5 companies that had the widest range of quarterly earnings estimates of any in the S&P/TSX 60, Canada’s large cap index. Basically, we were curious to see if this wide range of estimates translated into volatility for the stocks once actual earnings were released.
With Bombardier’s (TSX:BBD.B) release out of the way, all 5 have now reported and it’s time to go back and see if we can glean any insights from this little trial.
Tabled below are the 5 companies, their actual earnings, their estimated quarterly EPS range from the original post, and the stock price move in the first full day of trading after the release.
| Company Name |
Q1 EPS |
Est. EPS |
EPS High |
EPS Low |
Stock Move |
| IAMGOLD (TSX: IMG) |
$0.15 |
$0.16 |
$0.24 |
$0.07 |
+11.8% |
| Bombardier (TSX: BBD.B) |
$0.08 |
$0.08 |
$0.12 |
$0.04 |
+5.7% |
| Encana Corp. (TSX:ECA) |
$0.24 |
$0.06 |
$0.10 |
$0.01 |
-1.1% |
| Cameco (TSX: CCO) |
$0.07 |
$0.09 |
$0.16 |
$0.03 |
-0.4% |
| Crescent Point Energy (TSX:CPG) |
$0.30 |
$0.23 |
$0.35 |
$0.11 |
-0.3% |
Source: Capital IQ
There were a couple of big moves but I wouldn’t say there’s anything here in terms of volatility that you could hang your hat on.
Aside from volatility, it’s interesting to see that the stock that had the best reaction to quarterly earnings, IAMGold, actually missed the consensus estimate of $0.16 by a penny (can we still use that word?).
The company that blew out estimates, Encana, however suffered a loss of 1.1% during the trading day after its results were released.
What’s going on here?
Though the occasional valuable insight can be gleaned from a company’s earnings report, for the most part, they are noise. And this noise contributes to one of the basic truths of investing. Over the short-term, the stock market is completely random. Had you bought Encana knowing they would beat, and sold IAMGold knowing they would miss you would have been exactly right, and yet, exactly wrong.
Foolish Takeaway
Fools know that betting on earnings is a mug’s game. Use these reports for what they are – a periodic glimpse into a company’s performance. They are not a reliable way to make a quick buck.
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Fool contributor Iain Butler does not own any of the companies mentioned in this report at this time. The Motley Fool has no positions in the stocks mentioned above.
