Whether you’re a new investor trying to explore the world of investing or a mere student trying to know more about businesses, earnings calls are a great way to start. Now, earnings calls might seem confusing, but it’s actually a great way to gather insights regarding the financial stability of various companies. To better understand earnings calls, you need to know the basics.
Simply put, an earnings call is a live conference call conducted by publicly-traded companies to report and discuss their financial performance in a given quarter.
Earnings calls are open to the public so everyone can participate in an earnings call. However, you can expect the audience to be mostly comprised of journalists, analysts, and investors whether it be experienced or beginners.
Earnings calls are done over a conference line, so as a participant, you can simply access it using a toll-free number that will be announced by the company. Once you are dialed in, you can simply listen to the earnings call and hear the financial report delivered by company executives themselves.
Earnings calls happen at the end every quarter, which means there are four earnings calls in a year.
Listening to an earnings call is fairly easy if you know what to do. First and foremost, you need to read the earnings release. You can also check out the previous earnings call of the company, just so you can familiarize yourself and have a reference as you listen to the new one. The next step is to listen to the call and note all the financial data presented in the call so you can analyze and compare the data.
The structure of an earnings call consists of four parts: the introduction, the safe harbor statement, the presentation and discussion of data, and the Q&A session.
The introduction is where the management team of the company is introduced by the host or an operator. The safe harbor statement is where the management warns the listeners of forward-looking statements, predictions that have no certainty. Up next is the presentation and discussion of data where the financial report, including achievements and setbacks, is presented to the public. Last but not least is the Q&A session where participants are given the chance to ask the management some questions regarding the earnings report and the company.
Earnings calls are usually 46-60 minutes long.
Earnings calls are important because it gives companies the chance to highlight their success or progress in the quarter and to give investors and analysts a chance to explore the company’s standing before trading in the stock resumes.
The Q&A session is a powerful part of the earnings call and as a participant, you have the chance to ask the management specific questions abut the quarter they just had, the company, and more. Some of the best questions to ask on an earnings call include:
If you didn’t have the chance to participate in the live conference call, you still have a chance to access it by listening to the audio recording or by downloading earnings call transcripts – companies usually post them on their respective websites so they are more accessible.