I've found that earnings season is one of the least understood areas of finance... unless you happen to work in the investment analysis business. Most people haven't been acquainted with the importance of the quarterly earnings seasons nor their impact on stock market performance. Thus, I'd like to take a few moments to discuss this interesting topic.
U.S. companies with publicly-traded stock report revenue, earnings (or losses) and a range of other financial figures for each fiscal quarter. Thus, there are four earnings seasons each year, and each season typically begins 2–3 weeks after the end of a calendar quarter (though a few firms report earnings off-sequence). An earnings season will last around a month, but most of the activity occurs during the two middle weeks of the season. A public conference call by each firm's management team typically accompanies an earnings report. Equity analysts use these conference calls to ask questions... and attempt to earn some notoriety. I always say that you'll hear the smartest and the stupidest questions on these calls! (My favorite dumb inquiry: "How do I model your [insert financial metric here]?")
By the time you read this newsletter, most of our earnings analyses will have been published. That also means the stock market will have had time to re-price shares based on earnings. Every season brings volatility to the market, and a stock portfolio's annual returns are heavily impacted by quarterly reports. That's why you should care about earnings announcements! It's also why we comb through all of the earnings information released by companies we follow. We condense details from a 25–40 page SEC document, a slideshow presentation and a conference call into an actionable analysis of the company's results before presenting our own forecast. Click here to see an example of a Forward View earnings analysis from the first quarter of 2015.
I hope you have enjoyed this article and have a better understanding of earnings seasons. They're busy periods for me, but earnings seasons also separate the good analysts from the chaff. Forward View will always be focused on timely and useful earnings report research products because we're centered on client success 24/7.