Companies with new Guidance better than FY1 Consensus historically outperform

It is time to start up earnings again and as you know we have been sending out a daily comparing new guidance to FY3/17 consensus estimates. Over Golden Week, we back tested that theory and found that yes, historically Company that issue new Company guidance greater than new FY1 EPS consensus outperform. Companies that come in with new guidance 30% above consensus on average outperformed TOPIX by more than 8% in the most after the announcement. On the other side, Companies that issue new guidance 30% below FY1 consensus underperformed TOPIX by 4% on average.

Now 268 names announced before Golden Week and we ran the same analysis on the names that have reported. The results are very similar. Names that have reported new Guidance 30% more than FY3/17 consensus estimates are up on average 6%. Names that reported new guidance 30% below consensus are on average down 4% relative to TOPIX since they announced numbers.

Below is the historic average returns bucketed into the different groups. Please note that each bucket is not 0 to 10%, 10% to 20% etc…, but greater than 30% and then greater than 20% which also includes all results greater than 30%.

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