Earnings season is the most crucial time in the financial year for companies and their investors. Investors get to gauge the performance of a company while companies reap the benefits of a good performance. If you are new to the stock market, it is not easy to prepare for earnings season.
That is where we come in. We are a reputable source for news on upcoming earnings dates, such as the long-awaited Disney earning date and the Facebook earnings date. We also give an in-depth, easy-to-follow analysis of the latest earnings report.
What happens during earning season?
During earnings season, the U.S government expects companies to release their financial results to the public. This law allows investors to keep track of a company’s performance and make informed decisions on whether to sell or buy stock.
Earnings season usually falls in January, April, July, and October. However, this can differ for other companies.
Preparing for earnings season
The first thing you need to do during earnings season is looking at the forecasts. Before results are out, analysts come up with estimates that give an idea of the company’s expected performance. Analysts use forecasting models to develop EPS estimates that investors can use to gauge a company’s performance. Companies that exceed their estimates are rewarded by an increase in stock value and those that don’t often have a decline in stock value.
Forecasts can sometimes be hard to follow as different analysts have different ways to come up with estimates. As a result, these estimates can be very different from each other. To make up for this difference, some people prefer to use a consensus. The consensus is the sum of all available forecasts divided by the number of projections.
While a consensus might seem like a good solution, this is not always the case. The wide range of estimates that analysts give makes the resulting figure less accurate. Because of this, you should instead use assessments from reliable analysts only.
The disadvantage of EPS estimates.
Although investors use estimates to gauge a company’s performance, they should not always take them seriously. Just because a company doesn’t meet its expected EPS doesn’t mean that it is not growing.
Moreover, companies sometimes succumb to the pressure given by estimates and adjust their reports to meet their estimates. For instance, a company might add revenue from a current quarter or fail to mention costs from the reported quarter.
Being aware of reliable EPS estimates will help you prepare for earnings season. A company that continuously misses its estimates is a red flag, and one that consistently beats estimates is where you should put your investments. However, you should not take an EPS estimate too seriously as it is just an estimate. There are many other ways to gauge the performance of a company.
For more information on the latest EPS estimates and earnings reports for publicly traded companies, visit our website. We also give earnings dates such as Facebook’s earnings date and the Disney earnings date.
