Consensus Dispersion and IR

For any IROs that have been in the market long enough, today’s landscape of consensus estimates is all over the map.

Before the 2006 merger of Thomson and Reuters, for all intents and purposes there was one consensus number investors looked at as the hurdle on earnings day.  Today, not only are there four consensus providers, but the providers themselves are diverging in their results, leading IROs to spend more of their time unpacking consensus values and, in many cases, producing their own consensus values.

Europe, as the focal point of the impact of MiFID on research and corporate access, is the best place to look at the divergence of consensus estimates – but it’s also a place where IR teams are more free to publish the results of their own self-collected consensus.  Is there a day on the horizon when the issuer might become the primary source of consensus values for both the media and the buy-side?

Brian Matt, CFA, and Ryan Nagy, both of Ipreo by IHS Markit, in collaboration with Alex Money, CEO of ACE Consensus, share their report about the current state of consensus forecasts and where consensus may be headed, featuring research showing the dispersion of consensus estimates across the Europe Stoxx 600.  An excerpt:

MiFID II has begun to have an impact on how sell-side banks compete when facing the buy-side. With the pressure on buy-side firms to reduce their total number of broker relationships, we have anecdotally heard of different competitive strategies in play. Some bulge-bracket banks have actually increased their company coverage to gain an edge with investment firms that have multiple strategies and funds. Other independent research shops have poached talent from bulge bracket banks, but have kept their coverage universes the same size; electing to compete on quality and depth of research knowledge rather than quantity.”

Read the Special Report: Consensus Dispersion and IR