Earnings season is when publicly listed companies release their quarterly financial reports, and it is usually an exciting time for investors. Analysts give their earnings forecasts — predictions for a company’s growth and profitability — ahead of each company’s report. Depending on the analysts’ ratings, and whether the reported financials exceed expectations or fall short, a company’s stock price has the potential to be greatly affected at this time. With many companies which are leaders in their industries all reporting earnings within a short period, this can be especially true during the season’s “peak.”
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What are earnings reports and why are they important?
A quarterly earnings report shows how profitable a company has been throughout the previous three-month period. This, however, can be more complex than a simple revenue tally, as there are several metrics that analysts and investors look at to determine whether a company is a good investment. It is important to look at a company from a variety of angles to assess its true value, especially its future growth potential. We might think of earnings reports as a company’s quarterly financial health check-up.
How often do companies report earnings?
Companies follow an economic, or fiscal, calendar, rather than the regular calendar, and because each one has its own individual accounting periods, there are no set dates. However, a company is required to report once per fiscal quarter: Q1 is January through March, Q2 is April through June, Q3 is July through September, and Q4 is October through December. The majority of companies release their earnings reports in the weeks following the final month of each quarter, which, of course, is also the beginning of the next quarter.
Follow the eToro Earnings Reports Calendar to see exactly when earnings reports are scheduled to be released by publicly traded companies.
When is the earnings season peak?
The “peak” of earnings season is when some of the most high-profile companies in the world, such as Apple, Mastercard, General Electric, Microsoft and Facebook, report their earnings. This time is highly anticipated by investors who can expect to see some large movements in the market, since each of these companies exerts a broad influence on entire industries. The peak is generally a couple of weeks into the current earnings season, usually hitting around late January, late April, late July, and late October.
The next earnings season peak will occur around the end of July, 2021.
What should investors look for?
You will want to keep an eye on analysts’ forecasts just ahead of top companies’ earnings releases. On the eToro platform, you can go to any stock’s page and click the Research tab, where you will find analysts’ consensus and ratings, including links to the latest analyses.
Once earnings reports are released, the EPS, or earnings per share, is usually one of the metrics to get the most attention. The EPS is a calculation of how much a company earns per share of stock, which is the company’s total net income divided by the outstanding shares of its common stock. There are, of course, other important metrics to look out for, such as a company’s gross revenue and operating profit, or EBITDA, which stands for Earnings Before Interest, Tax, Depreciation and Amortization. For more information on what you should know about earnings reports, see eToro’s helpful Earnings Season Guide.
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Once you have done your research and have decided to take advantage of the earnings season peak to expand your stock portfolio, you can also enjoy a 0% commission rate on your investment. For more information on how to invest in stocks commission-free on eToro, click here.
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Happy earnings season!
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