Commercial Collections Blog

Short Term Earnings

A corporation’s earnings report can have a devastating effect on its stock price if earnings even barely fail to meet the company’s projections.  If a company misses its earnings estimates, investors may hammer its stock, thinking that the company would have used every accounting trick in the book to meet the projections. Therefore, the reasoning goes, missing projections must mean trouble is ahead.  Such pressure from Wall Street can force companies to implement unusual methods to meet short-term earnings targets, possibly at the expense of longer-term growth. A survey of more than 400 financial executives revealed that more than 70% of the respondents said they would cut discretionary spending on things like research, development and hiring in order to rein in costs, meet projections and satisfy Wall Street’s demands for hitting quarterly earnings targets. Some have suggested that companies should cease putting out estimates of quarterly earnings and focus more on longer-term business strategy. For more information call us today.

Burt and Associates
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