Softening The Blow Of Bad News

Chief financial officers and investors focus on earnings per share more than any other single financial figure. Researchers in accounting have long confirmed that the price of a company's stock is punished when a company's earnings fall short of forecasted earnings or, in the lingo, the company has a "Negative earnings surprise." Common wisdom, confirmed by empirical evidence, suggests that negative earnings surprises are punished proportionately more than positive earnings surprises are rewarded.