What Is Earnings Season?

forbes.com/advisor/investing/what-is-earnings-season

June 4, 2021

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Investing

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What Is Earnings Season? Why Is It Important?

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Anyone and everyone can invest in public companies, from market professionals to your
uncle Bob. That’s why regulators require publicly traded companies to disclose reports about
their financial health, to help investors make informed decisions about whether they should
buy shares or remain stockholders.

Public companies tend to release these periodic earnings reports around the same time every
quarter. This period is called “earnings season,” during which analysts and consumers pour
over reams of financial data to try and determine how a company is doing and how it might
perform going forward.

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Earnings season is the period when publicly traded companies release their most recent
quarter’s financial information in a report called Form 10-Q. During this time, many
companies also host conference calls to discuss the results and field questions from analysts
on Wall Street.

The information shared during earnings season can offer specific details about a company in
addition to trends in various industries and the pace of economic growth more broadly. The
data released is then compared with analyst estimates from before earnings season to
determine how a company did versus how it was expected to do.

When Is Earnings Season?

There are no official dates that mark the beginning and end of earnings season. Rather, the
seasons refer to the weeks when a majority of U.S. publicly traded companies are reporting
quarterly results. Companies have up to 45 days from the end of the quarter to file their
financial information with the Securities and Exchange Commission (SEC).

Many companies adhere to a traditional calendar, so there are four earnings seasons during
the year—beginning in January, April, July and October. Historically, aluminum producer
Alcoa’s earnings date was considered the unofficial kickoff to earnings season, but some
banks now report results a few days earlier.

Earnings season typically begins about two weeks after the quarter ends and runs for about
six weeks. Here’s a general timeline:

First quarter earnings season: Quarter ends March 31; earnings season begins in
mid-April and ends in May.
Second quarter earnings season: Quarter ends June 30; earnings season begins in
mid-July and ends in August.
Third quarter earnings season: Quarter ends Sept. 31; earnings season begins in
mid-October and ends in November.
Fourth quarter earnings season: Quarter ends Dec. 31; earnings season begins in
mid-January and ends in late February.

Those companies that adhere to a different fiscal calendar report results at other times. For
example, many retailers have fiscal quarters that are one month later—the quarter ends on
Jan. 31 rather than Dec. 31, for example.

Many investment research sites publish an earnings calendar that lays out the specific dates
when companies are scheduled to report results and host conference calls (if applicable).
Companies in the same industry tend to report earnings in close proximity, and there’s also a
cadence to the order—banks start off each season and retailers wrap it up.

Earnings Season and You

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There are days during earnings season when hundreds of companies are reporting results,
making for a very busy time on Wall Street. Some people get excited to comb through every
number in a company’s earnings report or scrutinize each comment from executives during
conference calls. While active traders may see the most direct impact from this flurry of
activity, long-term investors are also impacted:

The Market Is More Volatile During Earnings Season

Earnings season boils down to how expectations match up with reality. If a company’s results
beat or miss analysts’ expectations or commentary from management surprises market
participants, then its stock may experience some wild price swings as Wall Street analysts
and market participants update their recommendations and holdings.

As a result, you may see fluctuations in your portfolio during earnings season even if you
don’t own shares of companies reporting results. That’s because of the ripple effect one
company’s results may have on others in its sector and the broader market.

Earnings Season May Affect Your Stock-Level Investment Decisions

If you are considering buying a company’s stock, earnings reports offer a way to gauge the
health of its business. What’s more, some companies historically see bigger price swings
related to earnings—Netflix is one example—so knowing that in advance by checking a list,
like Bespoke’s listing of the biggest 40 earnings season movers, can help you to avoid any
unpleasant surprises.

If you own a stock, earnings reports are a good way to stay up to date as a shareholder. And
this information may be a factor in deciding whether to buy more shares or sell some. Even if
you don’t make investment decisions based on what happens during earnings season, other
investors and traders will—and, again, that can affect a company’s stock price and,
potentially, the broader market.

Earnings Season Affects Expectations for the Overall Market

Finally, analyst estimates for individual companies also offer clues about the future trajectory
of the broader stock market. Analyst estimates of earnings are aggregated for benchmarks
like the S&P 500. As companies in this index release results during earnings season,
professional investors may revise their expectations for where the S&P 500 is headed.

Bottom Line

If what happens in the stock market seems opaque, then earnings season can offer some
transparency. That’s because everyone—from professional money managers to day traders to
casual, long-term investors—gets access to the same array of financial information at the
same time.

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While it’s important to recognize that earnings season can be volatile, and therefore to avoid
making long-term investment decisions based on this short-term information, a bigger lesson
is how information flows between various players in the market. The financials that
companies report in earnings season informs analyst recommendations and, ultimately, how
the stock trades. Watching how all of this unfolds can make you a more well-informed
investor.

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