Earnings Surprise refers to the difference between a companyís reported earnings and the marketís expectations for those earnings. It occurs when actual results ó usually reported in quarterly or annual financial statements ó are significantly higher or lower than analystsí forecasts. Such surprises can lead to sharp movements in a companyís stock price, as investors quickly adjust their valuations based on new information.

Definition:
An Earnings Surprise can be either positive or negative. A positive earnings surprise happens when the company reports profits greater than expected, often resulting in a rise in share price. Conversely, a negative earnings surprise occurs when earnings fall short of forecasts, which may lead to a decline in stock price.

Formula:
Earnings Surprise (%) = ((Actual EPS ñ Expected EPS) / Expected EPS) ? 100
For example, if analysts predict a companyís Earnings Per Share (EPS) to be ?10 but the company reports ?12, the earnings surprise is 20% positive.

Impact on Investors and Markets:
Earnings surprises often trigger immediate market reactions. A strong positive surprise can boost investor confidence and attract buying interest, while a negative surprise can result in selling pressure. Over time, consistent positive surprises can enhance a companyís reputation for strong financial performance and management efficiency.

Factors Influencing Earnings Surprises:
- Operational efficiency and cost management.
- Revenue growth from new products or markets.
- Macroeconomic conditions such as inflation or demand shifts.
- Accounting adjustments or one-time gains/losses.

Conclusion:
In essence, an Earnings Surprise provides valuable insight into a companyís financial health and management performance. For investors, monitoring these surprises helps in identifying potential opportunities or risks, making it a key component of fundamental analysis and market forecasting.