You may have heard “Earnings Season” before and may not have known what or when this event occurred. 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. The majority of companies will report their information regarding the previous quarter. However, each company may have different timelines for their fiscal quarter, and some companies will report outside of this bulk season.
How Earning Seasons Could Impact Stock Prices
Earnings Season is vital for investors because financial reports are analyzed to gauge a company’s success. For example, if Company XYZ reports profits and earnings above expectations, they perform better than expected. This positive news could cause a jump in the underlying company’s stock. On the other hand, if Company XYZ has less profit than expected, their stock price could potentially decline on the news.
Why Earnings Season Matters For Investors
Companies often release their forecasts for the upcoming quarter during their earnings release. These forecasts help investors calculate their estimates for the upcoming quarter. Companies explain or rationalize their performance and estimates within the reports themselves or through a shareholder conference. If Company ABC tends to have seasonal sales, then they could use this 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.
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Zachary A. Bachner, CFP®