Four times a year, publicly traded companies release their financial statements and required disclosures during a period that’s become known as “earnings season.” The Securities and Exchange Commission (SEC) requires these reports to provide transparency to investors about how companies are performing.
What is earnings season, and what exactly should you be on the lookout for? Here’s what you need to know.
When is earnings season?
While there are not any official dates the SEC requires to mark the beginning or end of earnings season, the majority of publicly traded U.S. companies report their quarterly earnings more or less around the same time. The only official requirement is that the earnings report be released within 45 days of the end of each quarter.
Most companies follow a fiscal calendar of Jan. 1 through Dec. 31, with earnings season being the weeks following the end of each fiscal year quarter — meaning March, June, September and December. A few weeks after the end of each quarter marks the “beginning” of earnings season, a time when company earnings reports begin rolling in and investors digest the latest results.
Here’s a rough timeline of when reports begin posting:
- First quarter (ends March 31): Earnings season begins around April 15 through the end of May.
- Second quarter (ends June 30): Earnings season begins around July 15 through the end of August.
- Third quarter (ends Sept. 30): Earnings seasons begins around Oct. 15 through the end of November
- Fourth quarter (ends Dec. 31): Earnings season begins around Jan. 15 through the end of February
It’s worth noting that not all companies use the calendar year as their fiscal year. For example, many retailers have a fiscal year that ends in late January to account for the busy holiday shopping season.
What to keep an eye on during earnings season
Earnings reports are a good way to see how companies are performing and identify broader trends that may exist in the economy. If you own individual stocks, you’ll want to pay attention when those companies report earnings to see if the business is performing in line with your expectations. It may help you identify the right time to buy or sell shares.
Here are some key factors to focus on:
- Revenue and earnings can be found on the company’s income statement and show how fast it is or isn’t growing. Investors often focus on the company’s results relative to analyst expectations.
- Guidance is also provided by many companies and gives the management team’s estimate of how the business will perform in the coming quarter or year.
- Margins are a measure of a company’s profitability and show how well it is able to turn revenue into earnings.
- Earnings calls are held by most companies after their results are released and allow for analysts to ask questions about the business’s performance.
As you’re reviewing a company’s results, it’s important to compare what’s actually happening with what you expected to happen when you first invested in the stock. If you thought the company could grow revenue at 10 percent a year and expand margins, are they achieving those goals? If not, why not?
Also, related stocks in a particular sector can be impacted by one company’s earnings reports. Stocks in the same industry will typically trade in similar ways because their businesses are affected by similar factors. For example, if Meta Platforms trades higher after its earnings report citing a strong market for digital advertising, rivals Alphabet and Amazon might also trade higher despite not releasing reports yet.
Why is earnings season important?
Information released during each earnings season shows an individual company’s financial health and future forecasts of success, but also speaks to broader economic conditions as well. Both institutional and individual investors often react to earnings results to see if a company meets or beats market expectations. Consecutive quarters of weak earnings reports could indicate an economic slowdown or a company-specific issue.
Stock prices change from one second to the next, but over the long term, their values are supported by the companies’ underlying earnings. Earnings results provide a glimpse into how a company performed over the most recent three months, and the stock prices often respond accordingly.
Bottom line
Earnings season is an important time to evaluate your investments and keep abreast of how they’re performing each quarter. Keep an eye out for things like revenue, earnings, guidance, profitability and the market’s reaction.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
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