You hear it all the time. Costco misses its third-quarter earnings estimates by a penny and the stock gets hammered. Honeywell warns of a 1-cent shortfall of its second-quarter estimates and the shares sink to a 52-week low. Biogen undershoots the first-quarter estimate by 2 cents and its stock promptly loses 22%. Each quarter stocks are annihilated and executives lose their jobs when companies fall just shy of quarterly earnings estimates. This occurs even when vagaries like rising interest rates and oil prices, not operational flaws, are the culprits. Retail investors who don't have the tools to understand the numbers' significance-or lack thereof-get hurt.
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