Sell-Side Analysts Are Blowing It: CNBC (TJX, LTD)

According to CNBC’s Bob Pisani, competent sell-side analysts are a rare breed nowadays. He pointed out the glaring low quality of January retail same store sales predictions. A number of retailers outperformed the predictions by a wide margin.

Limited (NYSE: LTD) recorded 6% growth in contrast to the predicted loss of 0.1 percent. Similarly, The TJX Cos. (NYSE: TJX) recorded 12% gain beating the prediction of 7.1%.

According to Pisani, there are two reasons for the dismal quality of forecasts. First, most companies do not provide any guidance regarding monthly same-stores sales. Second, analysts generally take past trends as the predictor for future projections. This method leads to misleading projections. Thus, the investors need to be careful while using these reports.