How Earnings Reports Help Investors Stay In the Know
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In the US, publicly traded companies have a responsibility to be transparent about their financial health. A company's earnings report shows essential information, like cash flow, assets, and liabilities. These quarterly reports also help determine share prices and are a vital indicator of a company's fiscal wellbeing.
Here's how to use an earnings report to guide your investing in the US market.
Earnings call vs. earnings report
An earnings call is a conference call that rallies a public company's management team, analysts, media, and investors to discuss their financials during a quarter or fiscal year. This earnings call usually follows the earnings report release, which gives a thorough look into financial information for the term.
Earnings season is when numerous public companies release their respective quarterly earning reports.
Each season typically begins 1–2 weeks after the last month of each fiscal quarter (December, March, June, and September). This means you can expect most public companies to release their earnings from early- to mid-January, April, July, and October. However, some companies may report earnings between earnings seasons. You can find out when to expect a company's report by looking at their investor relations website.
Analysts and investors will review the information in the report and update their positions as needed. You may see share prices increase or decrease, depending on how well a company does financially.
Where can I find a company's earnings report?
You can find an individual company's earnings report in the investor relations section of the company website, or the EDGAR tool on the SEC website.
Key things to look for in an earnings report
Some crucial things to look for in an earnings report include:
Income statement: This includes revenue, cost of revenue/sales, operating expenses and earnings (profits), as well as earnings per share (profits divided by outstanding shares). The income statement lays out the company's income in the last quarter and allows investors to compare the company's profitability to other quarters.
Balance sheet: Reflects a company's assets (what it owns) against its liabilities (what it owes).
Cash flow statement: Shows how much a company exchanges with others.
Statement of shareholder equity: Shows the value of the company's outstanding shares (aka bought shares) and the potential dividend that the business will pay out.
It would help if you also asked yourself some questions while reviewing earnings reports:
How did the business do over the last quarter?
How did the company's performance compare to the prior quarter or the same quarter in other years?
Have this company's revenues improved or changed from quarter to quarter?
Is the cost of sales increasing for this company so that it has to spend more to bring in revenue?
Asking yourself these questions will make you more in tune with your investments, whether in the US, the UAE, or other geographic sectors.
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