Major investment houses sell side research produces thousands of researched a year in hopes of estimating earnings and fair market prices of equities. In the course of producing their research, analysts spend timeless hours at work researching the company, talking to different analysts, talking to the management, and watching the industry and the economy closely to come up with a sound recommendation. Stock prices usually reflect the consensus of the estimated earnings, thus, causing the stock market to be volatile at the earnings season as many companies reported earning are different from what’s projected.

Now this question puzzled me; how accurate is the research and analyst forecasts? We are just about to reach the end of the second quarter’s earning season and out of the 480 companies which reported earning from the S&P 500, 73% have beaten estimates, 11% reported missed estimates and only 9% of the consensus met estimates. Historically speaking,  in the past 8 quarters 63% of companies reported better than expectations, 26% reported worse and only 11% met estimates. Why is it that sell side analysts miss the right number a lot? Is it the lack of disclosures, or is it some accounting tricks to hike up the stock price, or simply we need to dig down deeper?

In the MENA region I’m not sure how accurate our earnings our, but I’m sure we have much less disclosures and more potential for accounting tricks due to lack of a strong watchdog such as the Securities and Exchange Commission (SEC) of the US. Further, I think we’re around the 11% meet estimates figure or even less.

Below are 2 charts relevant to MENA region Sell-side research:

Tags: bahrain, Brokers, egypt, GCC Earnings, GCC Sell-side research, jordan, Kuwait, MENA sell-side research, Miss beat meet estimates, morocco, oman, Qatar, S&P 500, Saudi Arabia, Sell-side, UAE

This entry was posted on Saturday, August 29th, 2009 at 9:10 am and is filed under Gulf, World. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.