The Earnings Drift Grade
One letter, A+ to F, that gauges where a stock is likely to drift in the window after it reports earnings. We fuse the market's true earnings expectations with investor sentiment to read Post-earnings Announcement Drift — the one market edge that has held up for more than fifty years.
The grade you want to own the morning after a report.
Stronger grades have historically drifted higher.
PEAD remains the only market phenomenon to withstand the test of time, consistently showing a predictable impact on prices in the aftermath of an earnings release. An earnings beat only moves a stock when it changes what the market already believed about the company's future. The Earnings Drift Grade measures exactly that gap — performance versus expectation.
It has persisted for over fifty years because it is underpinned by human behavior, which is enduring and unchanging.
Quarterly returns by grade
Avg drift held from the open after a report to the next one.
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A+ 7.4%
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A 6.6%
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A- 5.8%
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B+ 5.0%
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B 4.3%
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B- 3.6%
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C+ 3.0%
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C 2.4%
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C- 1.8%
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D+ 1.3%
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D 1.0%
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D- 0.7%
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F 0.4%
Reference: the S&P 500 averaged about 2.7% per quarter over the same window. C tracks the market; B or better has tended to beat it; D beats F, both lag.
Post-earnings Announcement Drift is THE quantitative analysis.
The idea underpinning the grade traces back to a phenomenon Ray Ball and Philip Brown surfaced in 1968 — Post-earnings Announcement Drift. Their paper, "An Empirical Evaluation of Accounting Income Numbers," set the stage for what we now call quantitative financial analysis.
Ball and Brown showed that a single financial event could push a stock to over- or under-perform the market for weeks afterward. That contradicted the Efficient Market Hypothesis, which holds that all news is priced in instantly. Their work challenged the prevailing belief that studying how financial statements moved share prices was a dead end.
Five decades on, quant analysis has exploded — every new strategy claims its own edge, some bordering on the absurd. Amid all that complexity, PEAD stands apart as the one consistent, time-tested signal that keeps proving itself across market conditions.
The evolving measure of market expectations.
Ball and Brown faced one big obstacle in 1968: a reliable way to know what the market expected before a release. That problem is largely solved. Bernard and Thomas (1990) used the average of analyst estimates to confirm the drift persists.
But the consensus estimate isn't the same as the market's real expectation. Bagnoli, Beneish, and Watts (1999) showed that whisper numbers are both more accurate than consensus and a better proxy for the price reaction. Expectations go beyond a number — anticipation of a "beat and raise," subscriber growth, or other non-numerical hopes shape investor sentiment. Any unexpected deviation forces a revaluation, and that is the drift you're trying to catch.
— Jesse Livermore
Investor sentiment is human behavior.
Markets are a reflection of collective human behavior. Our natural reaction to a surprise is to reassess and adjust — our beliefs, our actions, and our positions. When an earnings announcement defies sentiment, investors recalibrate, and that recalibration is what produces the larger drifts. Identifying where reality diverges sharply from what the crowd expected is the core of the grade's methodology.
The Earnings Drift Grade — a tool for finding PEAD.
The grade pairs an improved read of earnings expectations with a sharper read of investor sentiment, then turns it into one straightforward, actionable letter. Our system looks at the quality of a company's reported earnings against our composite measure of expectations and assigns a grade that maps directly to the deviation. D has historically beaten F while both lag the market; C tends to track the market; B or better has tended to outperform.
The grade earns its keep at the top of the scale.
A clear hierarchy of performance runs from F up to A+. Buying companies the morning after an A+ release and holding to the day before their next report is the textbook expression of PEAD — capturing the drift created when a quarter resets expectations sharply higher.
The chart is an illustrative hypothetical of that strategy versus the S&P 500. It is not a realized track record, and past performance — actual or simulated — does not predict future results.
See today's A+ names →A+ grades vs. the S&P 500
Hypothetical growth, buying A+ names after each report.
Six signals, one letter.
Every grade is a weighted blend of how the report reset the forward outlook versus expectations — not a price move. This is the exact card you see on a ticker.
Each component scores 0–100 and carries a fixed weight. Forward outlook leads at 30% because guidance moves estimates more than the headline beat does. The bars read like a report card: green is strong, amber is mixed, red is weak — and a low pre-earnings setup means the bar was already high going in.
- Outlook vs expectations, never price action
- Guidance and call signals pulled from the transcript
- One A+ to F letter, ranked against every graded name
Earnings drift grade
Outlook vs expectations on the last report — not price action.
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Forward outlook
30% weight
8 analysts raised price targets
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EPS & revenue
25% weight
EPS beat by 28% · revenue beat by 9%
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Profit surprise
15% weight
EBITDA beat by 33%; operating income beat by 67%
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Pre-earnings setup
15% weight
expectations were about average
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Analyst signal
10% weight
8 target raises
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Earnings quality
5% weight
gross margin up 2.8 pts; operating margin up 15.4 pts
Earnings Call Summary
A record quarter, with revenue up sharply year over year and a large new customer win. Management said demand is accelerating and they are expanding capacity to keep up.
Guidance Raised full-year revenue and margin guidance, implying growth well above the prior range.
Clearly positive report. Results beat expectations, though the forward reset is not the strongest.
See all A- names → · Sample card for illustration — not advice.
The grade is one screen in a full research layer.
Pair earnings grades with the rest of Trueearnings — every signal on every name, in one place.
A+ to F on every reported quarter
The 100 most-owned stocks, each graded on how the latest report reset its outlook versus expectations.
Open the grades → Earnings CalendarWho reports, and when — with confidence
A free, confidence-scored calendar of upcoming and reported earnings. We never present an estimated date as confirmed.
See the calendar →Buy the green letters.
See how every name graded its latest earnings, sorted A+ to F, updated as companies report.
Informational and educational only · not financial advice
Figures and charts on this page are illustrative of the Post-earnings Announcement Drift phenomenon and the grade methodology. They are hypothetical, not a realized track record, and past performance — actual or simulated — does not predict future results.