Earnings reports allow publicly traded companies to discuss their performance with investors and analysts. These provide a platform to discuss performance and dig deeper into the numbers. Analysts and investors can also ask questions of management during the earnings call.
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What is an earnings call?
Financial results announcements are typically made quarterly after listed companies announce their financial results. These calls are a way for management to explain last quarter's results, what's driving the numbers, and what investors can expect for the next quarter and the rest of the fiscal year.
Although the Securities and Exchange Commission (SEC) does not require companies to report their financial results, it is somewhat common practice.
What happens on a revenue call?
Financial reporting is typically conducted by the chief executive officer (CEO) and chief financial officer (CFO). In some cases, this may also include the Chief Operating Officer (COO) and other members of the senior management team.
The conference call typically begins with someone on the investor relations team issuing a safe harbor statement that protects the company from liability if actual results differ from what was discussed on the conference call.
From there, the CEO typically gives a testimonial about the company's performance over the past quarter. They then work alongside the CFO to provide financial results and revenue guidance.
If your statements follow a script, you will be exposed to questions from investment analysts who cover companies and investors.
How do analysts and investors use earnings reports?
Earnings reports are a great way for analysts and investors to better understand a company's financial health. Based on the summarized results, analysts ask guiding questions that help you understand the numbers more deeply. The answers you get from executives will help provide a more accurate estimate of what to expect over the next quarter or the rest of the year.
As an example, let's say a company reported a significant increase in revenue this quarter. The analyst will probably want to investigate the cause. Was it a product presentation? Have you entered a new market? They want to know if this revenue increase is sustainable or short-term.
Investors, on the other hand, use information from earnings reports to make more informed investment decisions. Earnings typically result in considerable volatility for a company. Traders can use it to their advantage and generate profits. However, long-term investors may use the pullback as an opportunity to buy at a more attractive price.
conclusion
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Earnings reports are a way for publicly traded companies to provide investors and analysts with up-to-date information about the company's financial health. These calls can be used to explore revenue and better understand future implications.
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This article originally appeared on GOBankingRates.com: What is an earnings call? Here's what novice investors need to know
