You follow your stocks daily. You are ready to buy and sell whenever an opportunity arises. Then, out of nowhere, boom, your stock jumps 5%. An hour later another stock plummets 9%. You ask yourself: what’s going on?! Crazy times!
Well, not so crazy. It might just be “earnings season.”
What is earnings season
Earnings season is when publicly traded companies announce their earnings. The year is divided into four quarters. About a week or two after each quarter, companies begin to announce their previous quarter earnings.
The year is divided up as follows:
Quarter 1: January- March
Quarter 2: April-June
Quarter 3: July- September
Quarter 4: October-December
eToro has an earnings season calendar where you can track when each company is scheduled to announce its earnings.
Why should I care about earnings season
When a company announces its previous quarter earnings, we find out two critical pieces of information. First: Was the company profitable? Second: Did the company’s earnings or losses meet expectations?
These pieces of information provide investors with a more accurate picture of the company’s value, and in turn, affect the stock price.
Market prices reflect investors’ attempts to continuously figure out the actual value of a company. This ongoing effort leads to rises and falls in the stock price of the company due to positive or negative events that impact the company. This could be news occurring in the broader industry of a company, or other economic events which can affect the price of a stock.
Throughout the year, analysts pore over statistics in an attempt to gauge the actual value and status of a company. Then comes earnings season. If analysts are correct in their valuation of a company, then the earnings will not have a major impact on the stock price. However, an earnings report which falls below expectations, or exceeds expectations, will reverberate in the stock price.
When a company’s quarterly earnings report exceeds expectations, it means that investors misjudged the value of the company. They thought the company was worth less than its actual value. However, the earnings report revealed that the company’s worth is much greater. Therefore, the stock price will jump based on that report.
The opposite happens when an earnings report falls below expectations. Investors realise that the company’s value is less and, therefore, the stock price falls.
Keep your eye on earnings season
If you are an investor, you want to be super focused during earnings season, especially relating to stocks in your portfolio. If you are researching other stocks, earnings season may provide you with indications on whether the stock in question is a good pick.
During earnings season, stocks tend to be more volatile, specifically in the period leading up to the earnings report and in the aftermath. During these periods, as an investor, you want to be on top of things to ensure that you make timely decisions about your financial assets.
We all have many events and responsibilities in our lives. It is not easy to remember when each company is reporting its earnings. eToro understands this. That is why we provide the earnings season calendar which can help you plan in advance and make crucial investment decisions in anticipation of these events.