Earnings Season: What Is It? Is It So Important?

Dec 25, 2023 By Susan Kelly

From Wall Street pros to your distant uncle Bob, investing in public firms is open to everyone. As a result, authorities require publicly listed firms to release financial reports so that investors may make educated decisions about whether to buy or hang on to their stock. This is why.

These quarterly earnings reports are often released at the same time each quarter by publicly traded corporations. What we call "earnings season" occurs during this period, when experts and the general public crunch financial data to see how companies are performing and what they could do in the future.

Earnings Season: What Is It?

When publicly traded corporations provide their most current financial information in a Form 10-Q, it is known as "earnings season." As a part of this period, many corporations have conference calls to report their results and answer questions from Wall Street analysts.

During earnings season, investors may learn not just about a company's performance but also about industry trends and the general rate of economic development. Analysts compare their pre-earnings season predictions to actual results to judge how well a firm performed.

When Is the Best Time to Buy Stocks?

Earnings season does not have a defined start or finish date. As a result, the seasons refer to the weeks in which most publicly listed corporations in the United States disclose their quarterly financial results. The Securities and Exchange Commission has 45 days from the end of a quarter to receive financial information from companies (SEC).

Many organizations use a conventional calendar, which means that there are four earnings seasons throughout the year: January, April, July, and October. Many banks now disclose their results a few days earlier than Alcoa's, traditionally regarded as the beginning of the earnings season.

The Season of Earnings and You

It's a hectic time on Wall Street during earnings season when hundreds of firms report their results. For others, reading through a company's financial report or listening to executives' remarks on a conference call thrills them. Long-term investors are likewise influenced by this rush of activity, even though active traders are the most directly affected:

Earnings Season is a Volatile Market

Earnings season is all about whether or not expectations are met. Market participants and Wall Street experts may see dramatic price movements in a company's shares if its results exceed or fall short of expectations or if management's comments shock them.

As a result, even if you don't own shares of firms reporting results, you may experience volatility in your portfolio during earnings season. This is because the results of one firm can have a rippling impact on other companies in the same industry and the broader market.

Earnings Season Can Influence Stock-Level Investment Decisions

Earnings reports are a good indicator of a company's business health if you contemplate purchasing its shares. For example, Bespoke's list of the most significant 40 earnings season movers can help you prevent any unpleasant shocks by allowing you to identify which firms have historically had more significant price movements about earnings—Netflix is one example.

An innovative strategy to keep informed as a stockholder is reading the company's quarterly earnings reports. If you decide to acquire additional shares or sell some, this information might help you make that decision.

The stock price of a firm and the market as a whole can be affected by the actions of other investors and traders, even if you don't base your investing decisions on what occurs during earnings season.

Earnings Season Affects Market Expectations.

Finally, expert forecasts for certain firms might shed light on the market's future course. An S&P 500 benchmark uses an average of earnings projections compiled by analysts. Professional investors' predictions for the direction of the S&P 500 may change when firms in this index report result throughout the earnings season.

Earnings Season in America - First Quarter of 2022

Banking titans JPMorgan Chase (JPM), Wells Fargo (WFC), and Citigroup (CIT) kicked off the first-quarter earnings season during the second whole week of April (C).

FactSet estimates that S&P 500 company earnings will expand at a pace of 5.1 percent this year, the slowest growth rate since Q4 2020.

Our interactive investor customers' most-traded and most-held US firms will be shown on this calendar, updated during the time.

The Bottom Line

Regarding the stock market, the earnings season might provide some clarity. Everyone, from expert money managers to day traders and long-term investors, has access to the same financial information. It is vital to know that earnings season can be volatile, so avoid making long-term investment decisions on this short-term information.

Analysts' recommendations and the stock market's price movement are influenced by the financial data firms release during the earnings season. You may become a better investor by keeping tabs on everything going on.

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