Earnings Surprise

The difference between a company's actual earnings and the consensus estimate.

What Is an Earnings Surprise?

An earnings surprise is the percentage difference between a company's actual reported EPS and the consensus estimate. A positive surprise (beat) typically pushes the stock higher; a negative surprise (miss) typically pushes it lower.

Surprise % = ((Actual EPS - Estimate EPS) ÷ |Estimate EPS|) × 100

Surprise Magnitude

The size of the surprise determines the stock's reaction. Research shows that stocks with surprises above 10% tend to see the most significant post-earnings moves. The relationship isn't linear though — a 20% surprise doesn't necessarily produce twice the stock move of a 10% surprise.

Post-Earnings Announcement Drift

One of the most well-documented anomalies in finance is PEAD (Post-Earnings Announcement Drift). Stocks that beat earnings tend to continue drifting higher for 60-90 days after the report, and vice versa for misses. This suggests the market doesn't fully price in earnings surprises immediately.