Definition of earnings surprise

earnings report that reports a higher or lower profit than analysts have projected. If earnings are higher than expected, a company's stock price will usually rise sharply. If profits are below expectations, the company's stock will often plunge. Many analysts on Wall Street study earnings surprises very carefully on the theory that when a company reports a positive or negative surprise, it is typically followed by another surprise in the same direction. Two firms that follow general trends in earnings surprises are first call and zacks estimate system.