How to Stay On Top of Corporate Earnings Reports
The third quarter of corporate earnings reporting began this week, and the numbers aren’t promising. More than 600 companies are expected to report. Eighty-four percent have confirmed they’re reporting, and nearly half have done so already. The big banks are expected to report the week of October 10 as well. According to Christine Short, VP of Wall Street Horizon, the numbers are going to be volatile.
Earnings reports provide investors with a detailed overview of a company’s operations and financial health. They also provide an indication of what the future holds for the company’s share price. Typically, public companies are required to produce an earnings report three times a year. These reports are called Form 10-Qs and are filed with the Securities and Exchange Commission (SEC). They outline the company’s financial performance and present its outlook for the next quarter.
During a quarter, companies often write off bad investments and sell assets that have no value. While this may make the company’s earnings look more favorable, it creates a lower base for future comparisons. In these instances, companies aren’t necessarily on track to beat earnings estimates. In other words, they may miss by a penny or two.
Typically, the stock market reacts favorably to the release of corporate earnings reports. While some analysts argue that it’s a purely psychological process, there is some empirical evidence that suggests earnings reports are a strong predictor of share price movements. Interestingly, this relationship was not as strong with positive news, but rather with negative news.
In addition to reporting earnings, analysts often issue earnings estimates and EPS estimates for companies. Earnings estimates are more important than the actual figures, since they affect how the market perceives a company’s financials. Companies often talk about beating or missing their estimates, and the disparity between expectations and reality can greatly affect share prices.
The most convenient way to know when a company will release its earnings is to consult a searchable earnings calendar. Most brokerage websites and apps feature a calendar showing major corporate events, including earnings. To stay on top of earnings reports, you can also use your mobile device to receive notifications when a company releases its earnings. In addition, many companies have investor relations sections on their websites. These sections contain financial statements, management notes, and other useful information for shareholders.
Analysts evaluate the company’s earnings results by comparing them to their previous quarters and years. They also look at the company’s revenue growth. If it’s not increasing, the company will likely need to cut costs. When that happens, the stock price will drop. Conversely, if it’s increasing, the stock will rise.
The information in the earnings reports can also help you evaluate the value of an investment. However, remember that earnings reports often hide more than they reveal, and you should avoid emotions when making an investment. The best way to decide whether a company’s stock is worth investing in is to evaluate its past performance and future earnings projections.