PT  - JOURNAL ARTICLE
AU  - Huong Ngo. Higgins
TI  - Earnings Forecasts of Firms Experiencing Sales Decline
AID  - 10.3905/joi.2008.701954
DP  - 2008 Feb 29
TA  - The Journal of Investing
PG  - 26--33
VI  - 17
IP  - 1
4099  - https://pm-research.com/content/17/1/26.short
4100  - https://pm-research.com/content/17/1/26.full
AB  - Many studies show that earnings forecasts of poor-performance firms contain large errors (Kothari et al. [2005], Brown [2001], Hwang et al. [1996], and Elgers and Lo [1994]). Why are these forecasts so inaccurate? This article demonstrates that inflexible costs, as captured through operating and financial leverage above the industry's normal range, are associated with large forecast errors during sales decline. The results are useful in helping investment managers better evaluate analyst forecast ability, and help analysts improve their forecasts by better anticipating the impact of inflexible costs on earningsTOPICS: Performance measurement, volatility measures, exchanges/markets/clearinghouses