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 Let
Earnings Be Your Guide
When you have
good news, do you like to tell it yourself or let someone else have all the fun?
What about when you have bad news? Would you rather choose the words carefully
or let a stranger blare it from a loudspeaker?
Publicly traded corporations are required to report their quarterly earnings to
shareholders and regulatory agencies, regardless of whether the news is good or
bad. But rather than letting analysts alone spread the word, many companies
announce their earnings results through press releases, conference calls, and
the Internet.
Understanding why companies issue earnings reports can reveal important clues
about the financial markets.
Most firms make public announcements within one day of their quarterly report
date, but some may issue guidance several days or weeks ahead of time. Here are
some possible reasons why.
Timing
— Quarterly report dates are usually set by the company's fiscal calendar. A company can better control the timing by preannouncing earnings
results on a day of its choosing. When the news is good, an early announcement
may help boost the stock price right away. When the news is bad, a
preannouncement can help the company get a jump on putting negative results in
the past and moving ahead with corrective action.
Control
— Leaving analysts to pore through quarterly results and publish
their findings may not always result in a message the company is comfortable
with. Although analysts will likely weigh in, the company can help shape
public perception by announcing its own earnings results.
Attention
— Because there are thousands of publicly traded companies, not all
are able to capture the media's attention. Earnings announcements can help a
company draw attention to itself.
Earnings can be a key to understanding the market's behavior and an
individual company's performance. Please call if you have questions about
earnings reports or your particular holdings.
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