Recently three ASX200 companies (Caltex, Metcash and Brambles) have posted record profits showing growth, usually on par with their predictions but the share price has plummeted because some analysts said the results were below "market expectations"
I am confused by something here. By "market" are they referring to the share-holders/buyers or the analysts?
If it is the former, how do they know what figures share-holders expect?
If it is the analysts, where are they getting the figures on which they base their expectations?
(Associated Press)Roger Collison, an analyst at Tyndall Investment Management, said the market had been expecting European CHEP growth of up to 6 percent.
I emailed Brambles and asked them about it:
Me: "The analysts were expecting (apparently) a 5% constant currency increase (in Europe's sales). Has the company ever intimated that this was achievable? If not, where did they get this figure from?"
Their Investor Relations spokesperson responded: "We have indicated to the market by June 2008, we should be exiting the year at volume growth of around 4-6%, up from the 1H07 figure of 2%. Unfortunately, we have no control on what analysts use in their forecasts.
So are analysts unrealistic in their expectations?
Have brokers/analysts been talking the shares up with their clients?
Could it be a sign that the economy generally is slowing and these are the first indicators?
On a related but different note...
What is there to stop analysts making statements like this knowing/hoping that the price will go down, hence making it easier for their clients/mates to buy in for a future take-over? This latter comment is not saying that this is what the above analyst is doing, but many analysts work for companies (eg Credit Suisse, Deutsche Bank) that have divisions that either invest in these companies themselves or bankroll people that do?
In this scenario, what is there to stop an investment bank having one of their analysts making a negative statement (whether it is really justified or not), then another division of the same company selling off large amounts of shares, watching the price go down and then buying in lower down?
Particularly given that a sudden drop in price will result in many shares automatically being sold as their stop point is reached.
I would be grateful if I could get some insight into this as I am trying to understand the way the market (share-holders/buyers) react to these announcements (by the companies and the analysts) as they have such a huge impact on the share price.