Wall Street analysts make it their mission to accurately anticipate a company's earnings, using forecasting models, management guidance and firm fundamentals to help them do so. But for all their efforts, they can't possibly see into a company's future -- and as a result, there's usually a discrepancy between their conjectures and the numbers borne out by reality.

Sometimes, a stock's actual earnings vary widely from its consensus estimates, the aggregate of analyst predictions for the quarter, year, and following year -- and these so-called "earnings surprises" often continue to confound analysts time and time again.

And this is in itself something of a surprise -- you'd think that analysts would learn from their previous mistakes and adjust the earnings numbers upwards or downwards next time around. But analyst logic is often overridden by an irrational impulse to cling to their original estimates, in a psychological phenomenon known as "anchoring."

Studies have found that when people are asked to make quantitative estimates, they're strongly influenced by the item's previous value. Essentially, numbers have a curious tendency to get stuck in our heads, making it difficult for us to break away from them -- hence the reason a salesman begins the negotiation at a high "anchor" price and works his way down, fooling the consumer into believing that the lower price is a good value.

This anchoring effect sometimes causes analysts to underreact to new information announced by companies. If they're overconfident and attached to their most recent estimate, they may be reluctant to give as much weight as they should to the information in the current earnings announcement. Simply put, earnings surprises tend to be followed by more earnings surprises ...

So it may be worth having a look at the stocks outperforming analyst expectations -- because if human psychology is any indication, there's a good chance that these companies will continue to outperform analyst estimates.

Here's a list of 10 rallying stocks that have significantly outperformed analyst estimates over the last year. To access a complete analysis of their past earnings performance, click here.

Earnings data sourced from AOL Money. The list has been sorted by the average earnings surprise over the last year. (Click here to access free, interactive tools to analyze these ideas.)

Company

Industry

Earnings vs. Analyst Estimates

Performance Over Last Year

Photronics (Nasdaq: PLAB)

Semiconductor Industry (Integrated Circuits)

Over the last year, the company has beaten analyst earnings estimates by an average of 60.65%

Stock has gained 94.35%

Polypore International (NYSE: PPO)

Industrial Equipment & Components

Over the last year, the company has beaten analyst earnings estimates by an average of 58.76%

Stock has gained 289.86%

Brigham Exploration (Nasdaq: BEXP)

Independent Oil & Gas

Over the last year, the company has beaten analyst earnings estimates by an average of 52.41%

Stock has gained 110.11%

Insight Enterprises (Nasdaq: NSIT)

Application Software

Over the last year, the company has beaten analyst earnings estimates by an average of 50.32%

Stock has gained 37.42%

Kindred Health care (NYSE: KND)

Medical Instruments & Supplies

Over the last year, the company has beaten analyst earnings estimates by an average of 40.85%

Stock has gained 40.87%

OPNET Technologies (Nasdaq: OPNT)

Application Software

Over the last year, the company has beaten analyst earnings estimates by an average of 40.51%

Stock has gained 133.42%

Chart Industries (Nasdaq: GTLS)

Metal Fabrication

Over the last year, the company has beaten analyst earnings estimates by an average of 39.88%

Stock has gained 116.35%

Amerigon (Nasdaq: ARGN)

Auto Parts

Over the last year, the company has beaten analyst earnings estimates by an average of 39.47%

Stock has gained 35.45%

Atlas Air Worldwide Holdings (Nasdaq: AAWW)

Air Services

Over the last year, the company has beaten analyst earnings estimates by an average of 37.54%

Stock has gained 46.3%

Timberland Co. (NYSE: TBL)

Apparel Footwear & Accessories

Over the last year, the company has beaten analyst earnings estimates by an average of 36.95%

Stock has gained 91.2%

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned above. Analyst ratings sourced from Zacks Investment Research. Note: The numbers on top of items represent the forward P/E ratio, if available.


Kapitall's Eben Esterhuizen and Alicia Sellitti do not own shares of any companies mentioned.

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