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Beat the Street: how get ahead of the Q3 earning surprises

With the US earnings season if full swing we highlight eight graphs which offer a compelling insight into reporting patterns.

Gaining an information advantage in the US is near impossible. Estimize, which anonymously crowdsources earnings estimates from Wall Street professionals, attempts to offer one way to do so. Since this year, member predictions’ beat the Street 77% of the time – for instance, Intuitive Surgical, above.

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EBay has consistently surprised to the upside of both Wall Street and Estimize predictions, but the latter has come closer to factoring in the good news. The auction site has done a better job than many of its rivals in capturing mobile users – which drove a 23% increase in Q2 revenue.

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Microsoft has been stronger than analysts expected, and while not immune to market gravity, Estimize users tipped earnings to fall more slowly than more widely expected. Even on mainstream estimates the stock is not ambitiously priced at 14.5 times earnings versus a sector average of 16.

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Short interest in biotech sector stocks such as Alexion Pharmaceuticals has risen on cyclicality this year, and while positive surprises have routed some of the bears, there remains outstanding interest in the company. A Q3 surprise could provide further upward impetus via a round of short covering.

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Netflix has proved to be a moving target this year, as analysts attempted to understand the impact of the end of its exclusive film distribution deal, domestic US saturation and overseas potential. Estimize users have proved better at predicting the downside surprises than the upside.

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Biotech business Amgen has rocketed in 2012, with a 55% year-to-date gain versus 10.96% on the Dow Jones Industrial Average. While Estimize users were some way short of anticipating the kind of explosive growth it has venjoyed, they got a lot closer than the Wall Street consensus.

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Displaying an unusually broad spread of divergence, Estimize overshot Amazon earnings at the end of 2011 while the consensus undershot, although the more optimistic prediction was the more exact. Since then Wall Street and Estimize have each won a quarter, with the Street expecting a weak Q3.

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Estimize users have been almost exactly on the money on VMware, which produces software allowing computers to run multiple operating systems, versus the more downbeat consensus this year. Q2 earning strength wasdriven by acquisitions and aftermarket servicing performance.

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