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November 20, 2012

Analysts Miss by a Penny

Urban Outfitters (URBN) reported earnings yesterday, rather nice earnings too. Sales up, margins up, share count down. So what does the "analyst community" post?
Urban Outfitters Misses by a Penny
By Zacks Equity Research

Shares of Urban Outfitters Inc. (URBN) showed a moderate decline of 1.1% to $36.65 during after-market trading hours on Monday, when this apparel, footwear and accessories retailer posted lower-than-expected third-quarter 2013 results. However, year-over-year earnings growth provided some cushion to the stock.

WTF is so bloody sacred about analysts' guesstimates?

Urban Outfitters didn't miss, the analysts did, they got their forecast wrong. If that were not bad enough, based on the Zacks headline the stock was punished after hours by Mr. Market. It's Zacks and the rest of the analyst community that should have been punished for making a bad forecast, they missed by a penny!

Al least some investors are taking advantage of this idiocy. Louis Navellier routinely looks for "earnings surprises." An earnings surprise happens when analysts make specially wrong forecasts and the company "beats" by several pennies or more. Mr. Market goes nuts and bids up the stock twenty, thirty percent or more creating an excellent opportunity to take profits on the spike.

What I can't logically figure out why investors put so much trust in analysts' guesstimates. Anyone who says the market is efficient should have his head examined!

Denny Schlesinger

Urban Outfitters Reports Record Sales Press Release: Urban Outfitters
Urban Outfitters Misses by a Penny by Zacks Equity Research

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