Listening to an earnings call is a great way to get insights regarding the financial performance of any publicly-traded company. Since this kind of large conference call is open to the public, you can get immediate data and a closer perspective on these companies. The best thing is, whether you’re someone who plans to be an investor or just someone who wants to know more about the intricate world of businesses, you can utilize these earnings calls for your own. But before that can happen, you need to know how to listen to an earnings conference call.
The first thing you need to do is to listen to the previous earnings call of a company. Take note of the benchmarks and metrics presented there and use it later to compare to the current data. You can also read reports from various analysts or news about that earnings call to have a better understanding of how the company performed in that quarter. After that, you’re ready to listen to the new earnings call.
The introduction and the safe harbor statement are the first few parts of an earnings call. Here, the conference call operator or presenter introduces the management in attendance. This is followed by the safe harbor statement where they notify the listeners that the call includes forward-looking statements that have no certainty and may differ from the actual results.
This part may not be much, but here, you’ll be able to get to know the management and understand that you shouldn’t rely too much on the expectations and predictions that you’ll hear.
The main part of the earnings call, of course, is the discussion of data. This is where the management lays all of their financial statements and performance. This can include the revenue, costs of products sold, marketing and administrative expenses, earnings before income taxes, net earnings and more. Management will also disclose additional information that can seriously affect the company or its finances such as ongoing investigations or ongoing litigations.
Make sure to take note of all these crucial data as it will help you understand just how well the company is currently doing, and help you decide if the company is worth investing in or not.
The Q&A session is perhaps the most important part of the earnings call. Listeners — particularly journalists, analysts, and other investors — will be able to ask questions regarding the company’s standing, the current financial performance, and more. Here, the management will be able to give further insights and data and share more key metrics to the listeners.
Listen closely to this part of the earnings call. You may not be able to ask a question yourself, especially if you’re not a journalist or an analyst, but you will be able to glean more than enough information and perspective as the management answers the others’ questions.
The tone of the speakers will say a lot in an earnings call. Managers who are agitated or frustrated is more than a clear sign that the company went through a tough quarter or that they are uncertain about a new product or a new venture. Managers who are calm and confident, on the other hand, can be a sign that the company reached their goals or that they remain optimistic despite a few setbacks.
Now that the earnings call is done, you can now analyze the results. Take a look at the facts and figures you have at hand and make sure to disregard metrics that are in no way relevant to investors. Analyze these results and compare them to the last earnings call.
And since most companies provide a transcription of their earnings call after the event, you have the chance to review the earnings call transcript. This can be a big help in case you missed an important detail and to better analyze all the data from the conference call. With all of these together, you’ll be able to come up with a decision or an action plan that will help strengthen your investing activities or enlighten you regarding the business industry.