What is Earnings Announcement?

US publicly traded companies, like Apple Inc. (NASDAQ: AAPL), tell everyone if they made any money in the last three months or the whole year.

They share this news in a few different ways:

• Conference call or webcast (also known as earnings call)
• A press release sent out as an official announcement (usually posted on their website)
• 10-Q and 10-K forms submitted to the Securities and Exchange Commission with all the details

Conference Call

In the conference call, senior management team present and discuss results with investors, analysts, and media in Q&A. The conference call are usually in the format of telephonic call or webcast. You can usually find out the schedule and recordings by checking the company’s investor relations website.

For example, the figure below shows Tesla’s investor relations website (https://ir.tesla.com/) which has the schedule of earnings announcement and all the recent webcast recordings.

Press release

Press release is a statement published on the company’s website. The press release includes a summary of the financial results.

You can also usually find out these documents on company’s investor relations website.

10-Q and 10-K forms

These are mandatory reports filed with the Securities and Exchange Commission. You can find out these documents on SEC website.

For example, the following figure shows Tesla’s 2023 Q3’s 10-Q quarterly report that can be found on SEC website (10-Q form).

The following figure shows Nvidia’s 10-K form filed to SEC (10-K form). This is an annual report.

Comparison

Companies have choices when it comes to sharing their earnings result. They don’t have to do a conference call or issue a press release. Sometimes they might release earnings result without a conference call.

However, SEC requires public companies submit 10-Q and 10-K forms. There is a deadline of filing (in the range of 40-90 days) depending on how big the company is. Companies need to file three 10-Q forms and one 10-K form (that includes Q4 data) every fiscal year. The report can be available before or after the conference call/press release, if there is any.

More often than now, a conference call will follow the issuance of a press release. Typically, both will precede the filing with the SEC, but this is not always the case. Sometimes, all three happen at the same time.

According to a survey conducted by the National Investor Relations Institute (NIRI) in 2016, 97% of respondent publicly traded companies does issue an earnings release. They typically do this through methods such as press release (80%), posting it on their company websites (73%), and conducting conference calls or webcasts (65%). For those that do conduct conference calls or webcasts, the majority format is telephonic call (80%), followed closely by webcasting (70%).

When are earnings announced?

Companies don’t have to report at the same time. Unlike individuals who usually have to do their taxes by April 15th each year, companies can choose when their financial year starts and ends. They do this to avoid any bad effects that might happen at certain times of the year in their industry. So, they have some flexibility in when they report.

For example, Nvidia (NASDAQ: NVDA)’s fiscal year 2024 starts from February 1, 2023 to January 30, 2024. The first quarter started on February 1, 2023 and ended on April 30, 2023. Nvidia reported its first quarter earnings on May 24, 2023 after market close.

As a comparison, Tesla (NASDAQ: TSLA)’s fiscal year 2024 starts from January 1, 2023 to December 31, 2023. The first quarter started on January 1, 2023 and ended on March 31, 2023. Tesla reported its first quarter earnings on April 19, 2023 after market close.

Note that companies may adjust their fiscal year from time to time. There can be more complex rules regarding the fiscal schedule.

While there are some variations in fiscal year schedule, you can expect many companies to share their earnings in early to mid-January, April, July, and October. These time frames are called earnings seasons.

You can find out the schedule of the exact date of next earnings announcement on companies’ website, or financial websites such as Yahoo finance.

Time of earnings announcement

According to a study by deHaan et al. 2015, about 98% of companies released their earnings info when the stock market was closed in 2011. In addition, half of these announcements happened after the market closed.

They also found that Thursdays are the most popular day to hold the quarterly earnings call, while Fridays are the least preferred.

This happens because when the market is closed, there are fewer people watching, and this can make things less chaotic and unpredictable.

Content of Earnings Announcement

Earnings announcements can contain these details:

• Financial statements: These show how well the company is doing financially, with numbers like income, balance, and cash flow.
• Important numbers: A summary of key numbers, like how much money they made, earnings per share, and profit margins, to see how the company is doing.
• Management indications: The company’s senior team talk about the numbers and explain what’s going on, and if anything big might affect the company’s future.
• Future predictions: They might also guess how well they’ll do in the future, with numbers like how much money they’ll make. They’ll also mention any problems that could make it hard to reach those goals.

What happens after earnings announcement?

The stock price can make big jumps after the earnings announcement. Here’s an example of stock price after Nvidia’s May 24, 2023 quarterly earnings call:

In this example, Nvidia held a quarterly earnings conference call after market close on May 24, 2023. During the call, the company announced better than expected earnings result and forecasted surging revenue, which surprised even the most bullish analysts on the Wall Street. The stock immediately jumped as much as 26% overnight, hitting an all-time high.

What caused the price movement after earnings call? There seems to be multiple factors:

• Stock price to earnings ratio
• If the earnings announced are much higher or lower than estimates
• Forward guidance the company gives for the future
• Broad market conditions such as bull or bear market

These factors can contribute together. For example, there are many companies beat on earnings but sell off because they said the following quarters see weakness ahead.

Besides short-term price swings after earnings, stocks often continue to move in the same direction as the surprise in earnings, and this can even last for as long as 3 to 6 months. This phenomenon is called Post-earnings Announcement Drift (PEAD).

In the article How to Trade Earnings Announcement, we will dive deeper into PEAD and provide some insights on trading after earnings announcement.

References

DeHaan, E., Shevlin, T., & Thornock, J. (2015). Market (in) attention and the strategic scheduling and timing of earnings announcements. Journal of Accounting and Economics, 60(1), 36-55.