What to Look for During Earnings Season

by Webster Lupton

Stock Market Earning Seasons Trees with Money Featured Image

When earnings season arrives, the best investors pay attention. That’s because it brings with it an indication of the stock market’s health, the economy, and individual companies. 

We say “season,” but there are really four earnings seasons during the year. Companies report their earnings and financial status quarterly, and the reports can cause a lot of activity in the market. 

Let’s look at the basics of earnings seasons – when they occur, what they mean, and why investors and analysts usually pay close attention. 

What is Earnings Season?

Earnings season is when the majority of publicly traded companies announce how much money they’ve made during a quarter of the year. Company officials give presentations, explain the figures, and make projections for the future. 

Federal regulators require companies to issue earnings reports for the benefit of investors. Corporations have to fill out forms for the government as well as make public announcements.

The earnings must be publicly reported and can be as simple as a press release. Still, many companies do an earnings call, a conference call with company officials explaining the information and answering questions from the press and investors.

When is Earnings Season?

Each earnings season begins a week or two after the last month of each standard quarter, so they occur four times throughout the year:

  • Quarter 1 earnings season is around mid-April.
  • Quarter 2 earnings season is around mid-July
  • Quarter 3 earnings season is around mid-October
  • Quarter 4 earnings season is around mid-January of the following year

Companies tend to issue earnings reports around the same time as each other, so there can be hundreds of them on the same day, but that’s not mandatory. Timing is usually also strategically done when the stock market is closed to keep the reports from being lost in the shuffle of daily trading. 

When Does Earnings Season End?

While each company must report its earnings quarterly, not all companies do it on the same cycles because some have off-season quarterly dates. Since everything doesn’t drop on the same day, the seasons can actually stretch for weeks.

Depending on how diversified you are and what you follow, there may be little time between distinct seasons.

Why Earnings Season is Important for Investors

Earnings season is a busy time on the market that offers clues for investors on the direction stocks may take. Individual reports reflect the health of a company. The biggest companies may report results that drive an entire sector or the market as a whole. 

As an investor, you may see fluctuations in your stock and be able to assess the possibility of putting more or less money into the stock or dropping it altogether and buying something else. It’s also a great time to investigate new potential investments.

Long-term investors generally don’t react to earnings season moves, particularly if their stock has an otherwise consistent track record. Short-term or more attentive investors may want to weigh a portfolio differently in reaction to an earnings report. Options players often see the fluctuations during these times as opportunities to employ various strategies.

What Earnings Season Means for Analysts

A company’s earnings report from its internal management is one thing, but the analysts’ reaction to it is another. Before each earnings season, Wall Street analysts predict what a company’s earnings should be.

When the official company report is issued, analysts weigh the results against their projections and announce their own assessments. It’s these evaluations that usually move the stock price one way or the other.

Stock Analysts’ Ratings

Analysts at large financial institutions offer ratings such as Buy, Hold, or Sell. Those ratings sometimes change in reaction to an earnings report. The stock price follows the analysis or the rating, sometimes causing as much as a 20% change.

All of this may change public opinion about a stock and its future. Again, reports and analyses of the biggest companies may change prospects for the stock, its sector, or the entire market. Consecutive good or bad earnings seasons can even reflect on the state of the whole economy.

Individual investors should consider analysts’ ratings when deciding what to do with a stock they hold or whether to move in a different direction.  

Important Sectors and Stocks During Earnings Season

There are sectors of the market, and companies in those sectors, that draw the most attention during earnings seasons. The main companies are often called bellwethers or leading indicators of market health.

General Motors and IBM are good examples because they have been market leaders for decades. Here are sectors and their biggest companies to watch during earnings season:

Energy

When the price of oil moves significantly, it changes the market and economic prospects because so much depends on the global fuel supply and demand. Oil companies are the primary driver in the energy sector.

Stocks to watch:

  • Exxon Mobile (XOM)
  • Chevron (CVX)
  • Transocean (RIG)
  • Shell (RYDAF)
  • Total Energies (TTE)

Industrials

The Dow Jones index is primarily comprised of industrial stocks covering manufacturing, transportation, construction, and machinery. Their reports carry a lot of weight during earnings season.

Stocks to watch:

  • Caterpillar (CAT)
  • Boeing (BA)
  • General Electric (GE)
  • UPS (UPS)
  • CSX (CSX)

Science and Tech

We are in “the Information Age,” so technology has become more influential in recent decades. This sector, most listed on the NASDAQ index, covers communications, research, computer stocks, and biotech.

Stocks to Watch:

  • Microsoft (MSFT)
  • Apple (AAPL)
  • Abbott Labs (ABT)
  • Samsung (SSU)
  • Amazon (AMZN)

Healthcare

We’re all customers of this sector in some way, and it influences the market during earnings season. This sector includes pharmaceuticals, hospital companies, clinical networks, pharmacy chains, and insurance companies.

Stocks to watch:

  • Pfizer (PFE)
  • United Health Group (UNH)
  • Intuitive Surgical (ISRG)
  • HCA Healthcare (HCA)
  • Eli Lilly (LLY)

 Financials

Financial institutions are the economy’s mainstays and big market movers during earnings season. They include banks, investment companies, and credit card companies. Cryptocurrencies are still considered outliers.

Stocks to watch:

  • Bank of America (BCA)
  • JPMorgan Chase (JPM)
  • Visa (V)
  • Mastercard (MA)
  • Berkshire Hathaway (BRK.B)

Consumer Goods

Retail and consumer goods go hand in hand because they represent basic necessities and the stores where you buy them. Retail earnings reports from the last quarter of the year (holiday shopping) are particularly important.

Stocks to watch: 

  •  Walmart (WMT)
  • Target (TGT)
  • Procter & Gamble (PG)
  • Coca-Cola (KO)
  • Macy’s (M)

Be Vigilant During Earnings Season

If you have a properly diversified portfolio of stocks, you’ll need to be vigilant with most sectors during earnings season. Look for the reports, the analysts’ reactions, and how they affect your stocks. It can keep you busy, but fortunately, StockMarketEye provides the perfect solution to keeping up with stocks during the earnings seasons.

With Stock Market Eye, you can import investments, categorize them, and track them to your liking. Plus, SME’s Watchlists let you follow groups of stocks you might want to buy.

Webster Lupton Avatar
Webster Lupton Webster Lupton is a former newspaper writer, editor, and author with experience in trading stocks and general investments. He likes sports, the outdoors, and bird-watching.
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