Predicting Earnings? Odds Are You'll Whiff Since Most Forecasts Are Wrong: Study

Finance pros are rarely correct when it comes to predicting earnings.

That's according to a massive study, which surveyed 357 CFOs and other C-suite executives of publicly-traded companies in 2021.

The results, revised in February, show that a large majority of managers "indicate a 78% likelihood they will report results within their guidance range even though historical estimates for these firms suggest this occurs only 31% of the time."

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In other words, managers are overconfident and "do a relatively poor job of predicting earnings," the study states.

These "miscalibrated" forecasts are likely why analyst earnings estimates are rarely accurate, per Bloomberg data.

Paul Hribar, an accounting professor at the Tippie College of Business at the University of Iowa and a co-author of the study, blamed it on manager "hubris."

This begs the question: How much faith should we have in analyst predictions?

With Salesforce Inc CRM earnings set to be announced on Wednesday, May 31, will the $1.49 earnings per share estimate by analysts be accurate?

Did Jefferies overestimate when it stated that paint and coatings giant Sherwin-Williams Co SHW deserved a price target of $275.00 and not $240.00?

Peruse Benzinga Pro to assist with your assessment. 

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