The Parallel Between Curb Appeal and Quarterly Earnings Estimates

Stock Analysts, Exterminators, and Realtors

To stock market neophytes, it always seems like a massive overreaction when Company ABC or XYZ announces that it’s going to miss its next quarterly estimate by 1¢, and its stock price immediately craters by 10% (or 40%!).

Ahh . . . but market veterans know what’s really happening.

Namely, in today’s real-time, social media-saturated environment, companies know exactly what analysts are projecting for quarterly net income — and that any disappointment or shortfall will be met with harshly.

Meanwhile, thanks to what’ll call the “accounting wiggle room” afforded by GAAP (at least as I recall as a CPA, once upon a time), companies have quite a bit of discretion accelerating revenues and/or deferring expenses, adjusting various reserves up or down, etc.

If, with all those options — plus Wall Street’s unforgiving expectations — senior management can’t find a stray 1¢ or 2¢ of income “underneath the couch cushions” to avoid a certain stock plunge . . . things are likely much direr than the company has previously let on.

As exterminators (and Realtors) know too well, “there’s never just one cockroach.”

Intuition & First Impressions; The Logic Behind “Unh-unh”

What’s missing quarterly earnings estimates got to do with selling homes?

Sellers know (or should) that curb appeal — and emotion generally — play a HUGE role in Buyer psychology.

That deteriorating concrete front step, the chipped paint on the front door, the overgrown hedge in front may not represent big outlays for the owner, but they’ll loom large in Buyers’ minds.

Sellers who are aware of that, and either won’t — or financially can’t — make the appropriate repairs very likely have deferred other repairs and/or updates elsewhere in the home as well.

That can be especially so when it comes to less visible but expensive capital items like roofs, chimneys, and the home’s electrical system.

All of which is why, when Buyers’ (or their agent’s) intuition walking up to the home is “Unh-unh” . . . they’re usually right.  

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