Earnings season can help you succeed as an investor: It's 'the clearest way to check in on a company'

Among the major factors complicating this math behind earnings and share prices: Investors are forward-looking and are therefore willing to bid up the price of a stock in anticipation of future earnings growth.

So far, of the 49 companies in the S&P 500 that have reported third-quarter earnings, about 86% have reported earnings that beat expectations, according to data from Refinitiv. "By the time all the companies report, that number will likely settle somewhere in the 70s," says Jeff Buchbinder, a market strategist at LPL Financial.

Why the ho-hum reaction from investors? For one thing, because missing quarterly guidance can ding stock prices, executives typically err on the side of conservative guidance, says Buchbinder. What's more, even though companies are exceeding expectations, the Covid-19-related economic shutdowns have kept those expectations low. All in all, Wall Street analysts expect earnings to have declined by nearly 19% in the third quarter.

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