CAPITAL MARKETS by Roger Martin

“The capital markets reward certainty. Nothing is surer to win analysts’ favor than a record of delivering predictable revenue and earnings, and nothing is surer to arouse their ire than a failure to meet earnings forecasts. Even a penny’s shortfall in quarterly earnings per share can trigger negative analyst reports, downgrades, and sell-offs. For example, on September 25, 2008, Research In Motion announced that its second-quarter profit had risen to 86 cents per share from 50 cents per share the previous year. Profits were $496 million for the quarter; revenue was $2.6 billion. The earnings-per-share results were just one cent below the consensus analyst estimate. How did the market respond? The stock dropped by almost 30 percent, destroying some $16.1 billion in value in a single day.”

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CAPITAL MARKETS by Roger Martin

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