Now that April 15 has been crossed off your calendar, another story dominating headlines is earnings season. Yes, it’s that time of the year when big publicly-traded companies report their corporate earnings for the previous quarter. Some will come with high expectations; some will disappoint and some will have an effect on the market after it is delivered.
These quarterly reports offer an interesting picture of the company from its array of information. This includes earnings per share (EPS), net income, continuing operations earnings and net sales. These “report cards” give shareholders an opportunity to see how the company has performed over the last quarter.
Especially scrutinized is EPS and net income as they’re compared to the previous year’s numbers. By doing this, investors can measure a company’s “financial health” and decide if they want to either begin investing in the company or change course if they’re already shareholders.
Earnings May Not Paint a Pretty Picture
By now, some big earnings reports have already disappointed. Some have exceeded expectations. But overall, what should we see in the latest slew of reports?
Well, you may not be seeing a lot of “A” report cards. Jeffrey Kleintop, LPL Financial’s chief market strategist wrote in a client note about recent earnings, “This has been the weakest earnings cycle in 55 years.”
He notes that during usual cycles, earnings are 50-70% at this point above from previous peaks but for the current cycle? There’s just been a 20% increase.
In addition, earnings growth since its previous 2007 peak has been under a 3% average. For the last two years, quarterly growth has only averaged 5%.
And when looking at this quarter’s reports, FactSet expects growth to contract by 1.7% but recover as consumers finally get out and start spending money again.
Kleintop noted of the upcoming earnings reports, “Rather than counting how many companies cite weather as a factor, or ‘excuse,’ in their earnings discussions, the market may be watching closely for how many businesses cite an improving trend emerging toward the end of the first quarter, as weather, began to normalize.”
But he’s not all gloom and doom as he is part of the camp that also sees growth rebounding.
Earnings Calendars and Questions
Now that we’ve explained earnings reports and hopefully not scared you away from recent ones, you may be asking where to find an earnings calendar so you don’t miss out on anything.
There’s an easy answer for this: check your favorite financial website or the company’s website. Whether it’s Bloomberg, Yahoo or CNBC, they’ll provide this information. Many financial websites also preview the market ahead in either the end-of-the-week or daily articles and this information is usually included.
Keep in mind that companies are not required by Federal law to announce the date of their earnings reports but many voluntarily do so as an opportunity for investors to obtain information about them as soon as possible.
Once companies announce their earnings, either before the market’s open or after the close, a conference call is then held within a few hours. Typically the company’s president or CFO leads it discussing the quarter and its numbers. Then analysts and investors will have an opportunity to ask management questions about the company.
This questions and answers can provide some interesting insight. These calls are broadcast on the company’s website and in can you missed it, they’re also found in call scripts. They can also be located on financial websites usually under earnings.
Don’t worry if you’ve missed your company’s earnings report. You can find information regarding it on the corporate website at a later date.
And there are still a few more weeks to go with the release of first quarter earnings as they’re reported throughout the month and at the start of the next one.