What are earnings reports?
Earnings reports are official quarterly financial statements issued by publicly traded companies. Companies listed on the stock exchange are required to file three quarterly reports with the US SEC (Securities and Exchange Commission) and an annual report at the end of its fiscal year. It is worth noting that companies trading at the OTC (Over-the-Counter) market are not required to file an earnings report to the SEC as OTC is not a stock exchange.
The report usually contains the company’s management’s commentary on the quarter’s performance, its guidance for the coming quarter, income statement, balance sheet, and cash flow statement. The income statement breaks down the company’s revenue and expenses, the balance sheet shows the company’s assets and liabilities, and the cash flow statement shows the company’s movement of cash. All earnings are reported under the Generally Accepted Accounting Principles (GAAP), an accounting standard adopted by the SEC. Companies listed elsewhere may have different compliances, for example, companies listed in Australia reports semi-annually instead of quarterly.
Earnings reports are very important as it allows investors to have an insight into the company’s financials and progress every quarter. The data allows investors to analyse whether the company is on track or not and determine if the stock is undervalued or fully valued. This will then influence their investing decisions going onwards. Besides, large companies’ earnings reports can also provide insight into the overall health of the business environment as well. The company’s stocks price is usually very volatile the day after it released its earnings as analysts start to place their price target based on the report.
Earnings reports are usually released during the earnings season.
- The first quarter’s earnings season begins in mid-April and ends in mid-May.
- The second-quarter earnings season begins in mid-July and ends in mid-August.
- The third-quarter earnings season begins in mid-October and ends in mid-November.
- The fourth-quarter earnings season begins in mid-January and ends in mid-February.
Financial companies such as banks usually start reporting earnings first which is then followed by retail and tech companies such as Apple (AAPL). The report is released on the company’s investor relations website before the market opens or after the market closes. For example, the earnings report from Apple can be found here. Websites such as Earnings Whisper and Zacks have a calendar that allows investors to track when are different companies are reporting their earnings.
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