What's The Beat Report's Reaction Score?

What's this "reaction score" we're always talking about?

It's how we statistically measure how significant an earnings reaction was.

We've tried many different methods, but this is the best way. Trust us, we've done the work...

In this post, we want to teach you how to calculate the reaction score on TradingView.

You can save this as a template in TradingView, so you only need to set it up once.

First, add the rate of change indicator with the length set to 1 and base it on the closing price.

Next, right-click on the ROC indicator (we use the default TradingView indicator) and select Add Indicator/Strategy on ROC.

From there, search for the Z-Score script (we use the script from jwammo12), make the length 252 periods, and calculate based on 1 standard deviation.

Here's what it should look like:

Now that we have the template, we can calculate the reaction score for any stock.

Here's how we do it...

In a spreadsheet, we take the z-score from the S&P 500 and subtract the stock's z-score from it.

Then, we adjust for the quarterly results...

1. If the company reports "Miss / Miss" and the reaction is positive, it increases the raw reaction score by 25%, which means the stock was rewarded despite missing expectations.
2. If the company reports “Beat / Beat” and the reaction is negative, it increases the raw reaction score (which is negative) by 25%, because it means, despite beating expectations, the stock was punished.
3. If the company reports "Miss / Beat" or "Beat / Miss", it increases the raw reaction score by 10% (whether it is positive or negative).
4. If none of the above happen (e.g., "Beat / Beat" and rally, or "Miss / Miss" and drop), it reverts to the raw reaction score.

Here's a powerful example of why we use the reaction score:

Wednesday, April 9th, 2025, was one of the best days in stock market history.

Almost every stock was up...

And up by a lot...

That day, Delta Air Lines $DAL rallied 23.38% after reporting mixed results.

This was the stock's 2nd-best earnings reaction (in absolute terms) ever.

Despite what seemed to be a great reaction, our reaction score was negative.

Here's how:

• The S&P 500's z-score (based on the calculation we described above) was 8.76
• Delta Air Lines' z-score was 8.18.
• The difference? -0.64

This tells us that the market (beta) caused the surge in price. It wasn't alpha...

Some of its peers, like United Airlines $UAL, had bigger moves. 

The U.S. Global Jets ETF $JETS was up 17%.

The bottom line is that the move had nothing to do with DAL's report. There were more significant macro forces at play...

Moreover, the signals are even more potent if a stock has a positive earnings reaction in a down market or vice versa.

Markets can be noisy, but our reaction score helps us get the information to make money.

We hope this helps!

Cheers,

The Beat Report team