In fact, some smart investors actually use analyst revisions as a contrary or a lagging indicator. In addition to making stock recommendations, analysts also enjoy predicting upcoming earnings numbers. In fact, if you watch closely, you'll find that when a company announces earnings, the stock price tends to move based on how the actual numbers differ from the whisper numbers, rather than how they differ from the consensus analyst numbers. Some of it could be blamed on a lack of skill, but the more reasonable explanation is conflicts of interest. Analysts are the primary way that a public company draws attention to its stock.
Positive attention helps the stock go up, negative attention drives it down.
Secondary stock offerings and bond offerings generate big bucks for underwriters, so there is a compelling opportunity for mutual back-scratching, at the expense of the investor who naively believes that the analyst is an objective source of information. Additionally, analysts who don't give a positive rating to a company will often find it difficult for them to get information from that company and to get in on its conference calls. If he did that to multiple companies, he'd be unemployed. I don't know why the SEC doesn't ask these firms to spin off their research operations. As described in the section above, analysts' earnings estimates tend to be predictably inaccurate.