Markets don't like negative surprises. Especially now.

Another entry for the don't surprise the market readings list. From today's Australian

ANY company delivering profits even slightly under expectations will face severe punishment by the market, analysts warn.

Reporting season moves into full swing today against a background of market volatility and uncertainty.

A stream of major results are scheduled over the coming days, including Leighton, Qantas and Wesfarmers.

"Given the skittishness of the markets, those that only just make earnings estimates consensus or slightly disappoint will probably be penalised and their share price will be sold down," Macquarie Private Wealth division director Martin Lakos said yesterday.

Managers claim that their share prices 'overreact' to missing an earnings target or forecast. Doug Skinner and Richard Sloan show that is especially so for small, growing firms (in a paper published in the Review of Accounting Studies in 2002, Earnings Surprises, Growth Expectations, and Stock Returns or Don't Let an Earnings Torpedo Sink Your Portfolio).