What Most Earnings Coverage Gets Wrong

On the July 27, 2026, episode of The Morning Filter podcast, hosts Susan Dziubinski and Morningstar Chief US Market Strategist Dave Sekera explain how Morningstar’s approach to earnings differs from other analysts in the media. Here is an excerpt from the show.

Using Earnings as a Guide for Long-Term Investment Theses

Susan Dziubinski: Walk us through how Morningstar thinks about quarterly earnings and how that might be different from other analysts in the media.

David Sekera: At the end of the day, we don’t try and play the quarterly earnings-per-share game. Our analysts certainly have their own quarterly forecasts, but we don’t publish them. In my mind, I think it’s really kind of nonmeaningful if you have any one individual quarter a company beat or miss by a couple of pennies. That in and of itself really doesn’t tell you anything.

Now, you always have to remember, too, companies manage Wall Street expectations. They put their guidance out there for the most part, and then they will talk to the Wall Street analysts to try and help the Wall Street analysts get to a relatively narrow range of where the consensus for earnings are. And they always try and set it up so that they can beat that consensus by a couple of pennies in order to try and make themselves look good. I always find that the media overly focuses on those beats and misses, essentially because I think it’s just easy for them to write clickbait headlines to try and drive views. But in those kinds of articles, there’s really no real analysis as far as why they either beat or missed those earnings.

So, when I think about earnings and the way that we look at earnings, it’s really much more looking at them as being a guide. Our earnings results track to our forecasts, and this really tells us whether or not our longer-term investment thesis and forecasts are still sound. Now, if there is a beat or a miss, that’s the time to then reevaluate what those forecasts are and your thesis, both whether to the upside or to the downside. And that’s when you start getting more meaningful changes in fair value when you then have to go back and reevaluate those forecasts because again, those longer-term forecasts are going to make much bigger changes in what we think the fair value of a company is today.

And then depending on whether or not we make that fair value change or whether we hold our fair value, if we don’t really think there is a big change to the valuation of the company, that’s when you start getting those larger discrepancies away from fair value, whether to the upside, in which case that’s probably a good time to take some profit. Or conversely, if you get a big downside gap and we’re holding our fair value steady, that’s a good time probably to start dollar-cost averaging in more to the downside.

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