Analyst's earnings estimates for publicly traded food companies: How good are they?

Mark Manfredo, Dwight R. Sanders, Winifred D. Scott

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

Professional analysts' estimates of earnings per share (EPS) provide a rare source of forward-looking information regarding the financial performance of publicly traded firms. Although numerous studies in the economics, finance, and accounting literatures have examined the properties of these forecasts and provided general insight into their performance, no known research explicitly examines the performance of analysts' EPS estimates for publicly traded food companies. This issue is particularly relevant given the influence that publicly traded agribusiness companies maintain in the agro-food supply chain (Vickner, 2002). Focusing on quarterly consensus estimates of EPS for 11 of the largest publicly traded food companies based on capitalization, the authors examine the point accuracy of these estimates through the introduction of the mean absolute scaled error measure, their performance over time, as well as their optimal forecast properties of bias, efficiency, and forecast encompassing. Results suggest that professional analysts, on average, produce EPS estimates that are more accurate than time series alternatives, yet the differences are often not statistically significant. For many of the firms examined, analysts' EPS estimates are found to be biased, inefficient, and do not encompass information in simple time series alternatives. For many firms in the sample, forecast accuracy has decreased over time. However, it is difficult to determine if this decline in forecast accuracy is due to turnover of analysts in the wake of increased financial market regulation (e.g., Sarbanes-Oxley), decline in forecasting skill, or structural changes in the food industry, which make it more difficult to forecast earnings over time. [EconLit citations: Q140; G170; M490].

Original languageEnglish (US)
Pages (from-to)261-279
Number of pages19
JournalAgribusiness
Volume27
Issue number3
DOIs
StatePublished - Jun 2011

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food industry
food
Food
time series analysis
market regulations
firm
performance
time series
finance
agribusiness
food supply chain
food and luxury products industry
food supply
financial market
turnover
structural change
Food Chain
Food Supply
Food Industry
agroindustry

ASJC Scopus subject areas

  • Agronomy and Crop Science
  • Economics and Econometrics
  • Food Science
  • Animal Science and Zoology
  • Geography, Planning and Development

Cite this

Analyst's earnings estimates for publicly traded food companies : How good are they? / Manfredo, Mark; Sanders, Dwight R.; Scott, Winifred D.

In: Agribusiness, Vol. 27, No. 3, 06.2011, p. 261-279.

Research output: Contribution to journalArticle

Manfredo, Mark ; Sanders, Dwight R. ; Scott, Winifred D. / Analyst's earnings estimates for publicly traded food companies : How good are they?. In: Agribusiness. 2011 ; Vol. 27, No. 3. pp. 261-279.
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