Explaining Firms’ Signed Earnings Announcement Stock Returns Using FactSet and I/B/E/S Data Feeds

Since 2001, the number of financial statement line items forecasted by analysts and managers that I/B/E/S and FactSet capture in their electronic data feeds has soared. Taking advantage of this rich new data, we find that 11 income statement and two cash flow statement analyst and management guidance surprises reliably explain variation in firms' signed earnings announcement returns. The most important surprises overall are (i) one-quarter-ahead sales guidance surprise, (ii) analyst sales surprise, (iii) analyst Street earnings surprise, and (iv) one-quarter-ahead Street earnings guidance surprise. No balance sheet surprises and no expense surprises are significant. We also find that the adjusted R2s of our multivariate regressions are up to six times those of univariate Street earnings surprise regressions, and that while the univariate coefficient on Street earnings surprise has risen since 2001, the multivariate coefficient has fallen. The latter result points to the inferential benefits of taking into account the full set of surprises, and in particular sales-based surprises, versus relying on Street earnings surprise alone