You may have heard the phrase “Earnings Season” before and may not have known what or when this event takes place.
Earnings Season refers to the time of the quarter when publicly traded companies release their financial statements and performance reports. The term “Earnings” refers to the profit that companies report, but losses are also reported if they occur. The “Season” usually lasts about a month and occurs within the first few weeks of every quarter.
This is the time where the majority of companies will report their information regarding the previous quarter. However, each company may have different timelines for their fiscal quarter, so some companies will report outside of this bulk season.
Why is Earnings Season Important for Investors?
Earnings Season is important for investors because the financial reports can be analyzed to gauge the success of a company. If Company XYZ reports profits and earnings that are above expectations, this means they are performing better than expected. This positive news could cause a jump in the underlying company’s stock. On the other hand, if Company XYZ makes less profit than expected, its stock price could potentially decline on the news.
How Do Companies Provide Additional Context?
Companies often times release their forecasts for the upcoming quarter during their earnings release. This helps investors calculate their estimates for the upcoming quarter. Perhaps within the reports themselves or through a shareholder conference, companies explain or rationalize their performance and estimates. If Company ABC tends to have seasonal sales, then they could use this as an opportunity to reassure shareholders that sales are expected to bounce back when they hit peak season.
Earnings Season – Summarized
- A requirement of publicly traded companies is to release quarterly financial reports.
- The timeframe in which these reports are released is referred to as Earnings Season.
- Investors use these reports to gauge the performance of individual companies.
Speak With a Trusted Advisor
If you have any questions about your investment portfolio, retirement planning, tax strategies, our 401(k) recommendation service, or other general questions, please give our office a call at (586) 226-2100. Please feel free to forward this commentary to a friend, family member, or co-worker. If you have had any changes to your income, job, family, health insurance, risk tolerance, or your overall financial situation, please give us a call so we can discuss it.
We hope you learned something today. If you have any feedback or suggestions, we would love to hear them.
Zachary A. Bachner, CFP®
with contributions from Robert Wink, Kenneth Wink, and James Wink
