Philip Nussel
Philip Nussel
Automotive News Online Editor

Will analysts' expectations continue to rule the economy?

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We've all known for years that analyst speculation is more important than any real numbers put out by companies or the government. And based on the way the financial media report the numbers, it seems abundantly clear that analysts' expectations can never be wrong.

Or could that be changing, maybe just a teensy bit?

This week General Motors said it pulled down a healthy $913 million profit during the fourth quarter and $3.77 billion for the year -- its fourth consecutive year in the black since our tax dollars saved the company from almost certain liquidation. Back in ancient history, like in 2009, the possibility of such a thing was about as likely as the Detroit Lions ending up in the Super Bowl.

Regardless, the financial media instantly declared, when GM released its year-end numbers Thursday at 7:30 a.m. Wall Street time, that the company's earnings missed analyst expectations by 20 cents a share. Rolling in billions of dollars in new profits under its inspirational new CEO Mary Barra, GM was doomed for a bad day on Wall Street.

But a funny thing happened as the day went on. Some analysts realized GM's numbers were actually pretty good.

Barclays analyst Brian Johnson declared: "Like a slightly used car with significant cosmetic damage but a working powertrain, GM posted a quarter that looks worse on the outside than on the inside."

GM stock didn't tank. In fact, it dropped all of one penny.

And today it all happened again when the monthly U.S. jobs report said nonfarm payrolls rose by 113,000 jobs in January, well below analysts' expectations of 185,000 jobs.

The stock markets nonetheless rose all day with the Dow surging 165 points, or 1 percent. Perhaps investors realized the worst winter in recent memory for much of the nation in January might have held back an otherwise strong economy with the lowest unemployment rate, at 6.6 percent, in five years. And GM shares? They bounced up 2.5 percent today to $36.10

To be sure, there can't be enough timely analyses of the economy. There can't be enough critical thinking when it comes to scrutinizing bellwether companies like GM. But the continued obsession with analyst expectations in real time by the financial media borders on the ridiculous.

Instead of reading about why a company misses analysts' expectations, can't we, just once, read a story about why the analysts were so wrong?

You can reach Philip Nussel at pnussel@crain.com.

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