Estimates Data Overview & Reports

Question 1

Who publishes and who uses estimates?

Answer 1

• Estimates data are generally produced by analysts on the buy-side and the sell-side. However, buy-side analysts only produce estimates for internal use. Therefore, when talking about estimates data, we usually refer to those published by the sell-side.
• Everyone (majority) on the buy-side uses estimates data, purchased from the sell-side, to make decisions about their portfolio holdings. Investment bankers use research published by their own equity or credit analysts as well to advise their own clients (there is often a Chinese wall between the investment banker and the research analysts).

Question 2

What are the three pieces of information found in every research report?

Answer 2

1. Target Price
2. EPS
3. Recommendation (buy, hold, sell)

Question 3

What is a consensus?

Answer 3

The consensus is the average (mean or median) of detailed estimates.

Question 4

What is Facts Estimates consensus window? And how long is the default consensus?

Answer 4

The consensus window is the time period associated with estimates used in the consensus. By default, FactSet ignores estimates more than 100 days old.

Question 5

What is a surprise?

Answer 5

• The difference between a company‘s reported quarterly or annual earnings (company or broker actuals) and the consensus estimate for that quarter or year.

Question 6

What is guidance?

Answer 6

• The management’s expectations about the future financial performance of the company. These numbers guide the analysts in their estimates.

Question 7

What is actual?

Answer 7

• Actuals are collected from press releases or are broker actuals
• Company actuals: from press releases for the corresponding past period.
• Broker actuals: estimates after the event regarding the current unreported period - remember it takes 45-60 days to file financial statements. Between that time, analysts can still make predictions for the period.

Question 8

What is the majority methodology?

Answer 8

• Brokers do not have to follow the accounting standards when they make predictions.
• FactSet assigns the majority methodology (GAAP vs non-GAAP) to the default consensus. For example, if the majority of brokers report following the accounting standards, then FactSet will report this as the main consensus figure.
• Note: FactSet still reports the minority methodology as well.

Question 9

What is the Sharp Consensus?

Answer 9

• A more accurate measure than the “normal” consensus. It identifies the revision patters within the default consensus window. It then creates a custom window and reports a new consensus called the Sharp Consensus.