Publicly traded companies communicate with their shareholders and the general public in a number of ways. They issue press releases when they have news to report. They file reports about quarterly earnings and material news events with the Securities and Exchange Commission (SEC), and they hold earnings calls each quarter.
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During these calls, they discuss financial results and topics like company initiatives, the business environment, and the competitive landscape. They also field questions from Wall Street analysts during earnings calls, allowing investor representatives to address company management and solicit more information.
What is an earnings call?
What exactly is an earnings call?
Earnings calls are quarterly conference calls management holds to discuss financial results. Typically, the earnings call immediately follows the release of the quarterly earnings report.
While the SEC requires companies to report earnings and file a 10-Q (quarterly) or 10-K (annual) report, holding an earnings call is not required. However, such a teleconference has long been customary for most publicly traded companies, and almost every major company holds an earnings call.
One exception is Berkshire Hathaway (NYSE: BRK.A, NYSE: BRK.B), Warren Buffett's conglomerate. Berkshire typically releases earnings reports on a Saturday with little fanfare.
What happens in an earnings call?
What happens in an earnings call?
Earnings calls typically follow a similar script. They are usually hosted by the company's chief executive officer (CEO) and chief financial officer (CFO). They also may include other executives, such as the chief operating officer (COO), to help answer questions and provide additional color.
The call begins with a scripted high-level discussion of the quarter by the CEO. This could include the overall performance, product launches or initiatives, and any successes worth noting or new challenges that have arisen.
The CEO's discussion is followed by a walkthrough of the financial results, usually by the CFO. At the end of the CFO's scripted portion, they often discuss guidance for the current quarter or the full year.
Once management completes their presentation, the call moves on to a question-and-answer (Q&A) session. Management fields Wall Street analysts' questions regarding the results, guidance, macroeconomic environment, and competitive landscape, among other topics.
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The Q&A session is a good opportunity for analysts and the public to learn new things about the company since the scope of their questions tends to be broad. Management generally takes questions from around a dozen analysts. For most large companies, the earnings call lasts about an hour, although it can be significantly shorter depending on the number of questions.
Why you should listen to earnings calls
Why you should listen to earnings calls
Earnings calls offer unique opportunities to hear management's thoughts about the company's current performance. Further, the dialogue with Wall Street analysts can reveal information and anecdotes you won't get elsewhere.
It's a good idea for investors to review most of the information released each quarter, including press releases, presentations, and 10-Q filings. However, the earnings call often contains information not found in any of those filings.
In addition to a frank discussion about the company's results and performance, the earnings call can also contain information and discussion about new product launches, acquisitions, layoffs, share buybacks, or other material announcements investors should know about.
While listening to the earnings call is more time-consuming than reading an earnings release, it's the best way to gauge management's current perspective, get a sense of what Wall Street thinks about the stock, and learn something new about the company.
A good example of an earnings call
What's a good example of an earnings call?
One company that tends to follow a similar routine with its earnings calls is Meta Platforms (META -0.2%), the social media company that owns Facebook and Instagram.
CEO Mark Zuckerberg typically begins a call with a discussion of how individual products, such as Reels -- its TikTok-like short-form video server -- have performed. Zuckerberg also makes an effort to discuss the company's progress toward its goals, including the metaverse and the upcoming Quest 3 headset.
And Zuckerberg is unafraid to delve into larger themes, such as the company's battle with Apple (AAPL 0.16%) to own the next computing platform or to correct the media narrative that the company was stepping back from the metaverse (which he said it isn't doing).
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Following Zuckerberg's presentation, CFO Susan Li discusses the financial results and guidance, including data points, such as its user base, and more qualitative metrics like engagement. She closes her presentation with a review of the company's guidance.
Meta's Q&A session tends to follow a similar cadence to most earnings calls. However, Zuckerberg is more forthcoming than most CEOs, making Meta's earnings calls especially informative.
Whether you're investing in a bull or a bear market, it pays to be an informed investor. And one of the best ways you can do that is by listening to the earnings calls of the stocks you own.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Jeremy Bowman has positions in Meta Platforms. The Motley Fool has positions in and recommends Apple and Meta Platforms. The Motley Fool has a disclosure policy.
FAQs
Earnings calls are quarterly conference calls management holds to discuss financial results. Typically, the earnings call immediately follows the release of the quarterly earnings report.
What is the meaning of earnings call? ›
Meaning of earnings call in English
a teleconference (= a meeting between people in different places, connected by video, phone, etc.) in which a public company talks about its financial situation: In an earnings call on Tuesday, the CEO told investment analysts, "The prospects are good for continued growth this year".
Is an earnings call required? ›
There is no legal requirement for a company to conduct an earnings conference call. In fact, some public companies prefer not to conduct these calls and would instead release quarterly performance reports, which they are required to disclose.
What is the earnings call 101? ›
An earnings call, also known as a quarterly earnings call or earnings conference call, is a scheduled teleconference or IR webcast where the leadership team of a publicly traded company provides an in-depth discussion of the company's financial performance for a specific period – usually on a quarterly basis.
What do investors look for in earnings calls? ›
These quarterly calls are where companies share financial information like revenue, profit, losses, and earnings per share (EPS). Quarterly calls align with a companys fiscal year, which may be different from the calendar year.
Do stocks go up during earnings call? ›
Stocks often see sharp moves around the announcement, as investors react to the results and how those numbers compare to estimates or expectations. A positive surprise can drive a stock higher, while disappointing results can send it suddenly lower.
Should you buy before or after earnings call? ›
If you believe a company will post strong earnings and expect the stock to rise after the announcement, you could purchase the stock beforehand. Conversely, if you believe a company will post disappointing earnings and expect the stock to decline after the announcement, you could short the stock.
What happens to stock after earnings call? ›
If a company has been profitable leading up to the announcement, its share price will usually increase up to and slightly after the information is released. Because earnings announcements can have such a prominent effect on the market, they are often considered when predicting the next day's open.
How do I prepare for an earnings call? ›
Successful earnings calls start with meticulous preparation. Begin by establishing a timeline and assigning responsibilities to your team members. Set clear objectives, review past calls, and gather all necessary financial data, presentations, and scripts well in advance.
Can anyone ask a question on an earnings call? ›
Earnings calls allow publicly traded companies to discuss their performance with investors and analysts. They provide a platform to discuss performance and dive deeper into the numbers. Analysts and investors can also ask the executive team questions during earnings calls.
Investors should treat earnings calls as valuable information on a company but know that it doesn't typically paint the complete picture of its potential performance. Additionally, it may help to listen to the tone of the company's executives when they are talking about the company's performance.
Are earnings calls recorded? ›
Many companies provide a phone recording or presentation of the earnings call on their corporate websites for a number of weeks after the actual call, making it possible for investors who could not log in to the call to access this information.
Where can I find earnings calls? ›
The most recent webcasts or audio of the earnings calls are posted on the company's website, usually on the Investor Relations page. Companies offer free e-mail alerts so that interested investors are notified when new calls are available.
Why do stocks drop after a good earnings call? ›
When a company releases an earnings report, a fundamental reaction is often the most common. As such, good earnings that miss expectations can result in a downgrade of value. If a firm issues an earnings report that does not meet Street expectations, the stock's price will usually drop.
Can anyone attend an earnings call? ›
Earnings calls are a public event for public companies, usually attended by institutional investors, retail investors, financial analysts and journalists.
How to summarize an earnings call? ›
How to Analyze Them. Start by focusing on the financial overview, future guidance, and the Q&A session. Look for themes, how confidently management addresses challenges, and any strategy changes. The tone and word choice can also reveal management's outlook and concerns.
Why do companies hold earnings calls? ›
Key Points. Most publicly traded companies hold conference calls following the release of quarterly results. During earnings calls, CEOs typically discuss business conditions and take questions from analysts. Quarterly earnings calls can be a source of valuable investor insight beyond financial statements.
How long does an earnings call last? ›
Typically, an earnings call lasts for 45 to 60 minutes. However, there are no statutory guidelines for the call duration. Also, the course of the call majorly depends on how much time is taken in the question-and-answer session.
Why would a company push back earnings call? ›
However, most often, the delay will be a result of the company not completing the report on time due to audits taking longer than expected, inexperienced officers completing their first report and the firm losing some or all of its financial data due to a technical error, fire or theft.
