What the Market Orders Share Your Views. Predictability is one of the things investors and analysts, and consequently CEOs, want most. The expectations for consistently increasing quarterly earnings are greater than ever. In fact, meeting analysts' expectations has become so important that missing a quarter, even by a mere penny, can send the stock plummeting.
Most companies do a fairly good job of hitting their targets.
Although the term has negative connotations, even the most respected companies have caught on to the fact that accounting and business decisions can be timed in a way that will smooth or even temporarily boost quarterly earnings. Companies can build up reserves for bad debt and product obsolescence to higher than normal levels. When they come upon a sluggish quarter, they simply reverse the reserves into earnings. Companies can plan asset sales and other one-time gains to offset expenses and keep earnings smoothly trending upward. Depending on how the numbers look, companies can either frantically ship inventory in the final week of the quarter, or save the sales for the following quarter.