It happens four times every year, and for those who are in the know, it is a quarterly event to watch out for. It can be a make-or-break moment for major companies, and an exhilarating time for certain market traders.
But many of us have never even heard of this significant event. We are talking about earnings season. What is earnings season, you may wonder?
Four times each year, at the end of each quarter, many publicly traded companies publicize their earnings reports from the previous three months, flooding the market with new information. This quarterly event has huge implications for investors and traders for a number of reasons.
In this article, we will take a look at when exactly earnings season takes place, how it affects market participants and analysts, and how to invest in it.
When Is Earnings Season?
Since earnings season takes place four times a year, most companies will publicize their quarterly earnings reports in early to mid-April, July, October, and January.
Not all companies release their reports during earnings seasons, as the report is determined by when a company’s financial quarter ends. So some companies will release their reports in-between seasons.
But for the majority of publicly traded companies, the unofficial start to the quarterly earnings season is when Alcoa (NYSE: AA) releases its report.
Because it is among the first to release its earnings each quarter, Alcoa, an aluminum producer, forms a significant component of the Dow Jones Industrial Average.
Once Alcoa’s report is out to the public, a slurry of earnings reports is released. Being an unofficial quarterly event, the earnings season has no official start or end.
However, once a large number of major companies have put out their reports, the season is considered to be over. This usually occurs around six weeks after Alcoa releases its earnings.
During some quarters there is the scant time between earnings seasons, as the next round of earnings reports can start to be released just over a month after the release of previous quarter’s reports.
Still not sure about the timing of earnings season? Take the following example: at the start of the second week of April, Alcoa releases its report.
This marks the start of earnings season for the first quarter. For the rest of this second week of April, more and more companies will release their reports.
Roughly six weeks later, by the end of May, the number of new reports dwindled to the same level as before the earnings season.
What Does This Mean For Investors?
Earnings season is a dynamic time for participants in the stock market, from analysts to traders to investors to financial news media sources.
Financial news media outlets like The Wall Street Journal and CNBC extensively cover the biggest earnings releases.
They provide a recap for the public, sharing whether and where companies fulfilled, disappointed, or exceeded the expectations of financial analysts.
Each party participating directly in the market will also take time to review the latest reports and assess what effect the statistics may have within their company or as investors in a company.
Market participants tend to shift around shares in the companies releasing their reports. As new data causes new movements, company shares can spike or fall by as much as 20%, or more.
For many traders, the earnings season is an exciting time in which to strategically position themselves in the market. Savvy traders can take advantage of the changes brought about by the data in the reports to play the market.
For example, a trader could short a stock before earnings causing the price to fall which could then cause a sell-off.
Other traders, meanwhile, prefer to wait out the excitement and tumult that earnings season can bring, as it may also present too many uncertain people making swift decisions.
At times like this, too many human factors can destabilize the market and for some traders this means it is better to sit tight and wait out the less predictable ups and downs.
How to Invest, Hassle-free
In order to take advantage of the information released during earnings season, prospective investors will want to act fast. But what should traders and investors look for in the actual earnings reports themselves?
Consistent earnings are one of the strongest indications that a company is doing well. If a company has underperformed during one quarter or otherwise disappointed analyst expectations, it may mean a temporary setback.
But if the negative reports start to pile up, investors will take note. No one wants to stay on board a sinking ship and too many negative earnings reports can spell bad news for even a strong company.
For some new investors, that can mean that the influx of shifting data presented during earnings season is overwhelming. In that case, you may need some assistance.
On the Wealthface app, you can find an easy, intuitive, system to help you navigate the ever-changing market. Virtual analysts can interpret the latest data and advise you on where and how to invest, plus when and where to change your shares in various companies.
So Wealthface makes it easy to take advantage of earnings season and invest with minimal hassle.
The Wrap-Up On Earnings Season
So let’s recap what the deal is with earnings season.
Each quarter, at the beginning, or middle of either April, July, October, or January, a large number of companies that are publicly traded will release their earnings statements for the previous quarter.
This sparks a chain reaction, in which analysts, traders, news media, and investors interpret the new information revealed in the reports.
Then they move around shares accordingly, making adjustments as more companies release more data.
After about six weeks it’s over and the whole system regroups as companies and market players get ready for the next earnings season when the process will repeat all over again.
For investors who want to take advantage of the quarterly earnings periods, Wealthface makes it easy to hit the ground running, move around stocks and shares, and keep up with the latest data.