It happens four times a year, but it can catch some by surprise.
It’s called “earnings season,” and it’s the period when the majority of companies included in the Standard & Poor’s 500 give shareholders an update on business conditions.
Earnings season starts one to two weeks after the calendar quarter ends. For example, when the calendar quarter ends on September 30, publicly traded companies will start scheduling calls with shareholders by mid-October. On a busy day, more than 400 companies check in with their numbers. On slow days, typically Mondays and Fridays, you can expect to hear from fewer.1
Is Earnings Season Important?
We watch earnings season closely for a variety of reasons.
First, we want to hear from leading companies when they discuss their business outlooks. Do they expect sales and earnings to increase or decrease? Second, we want to learn more about which sectors are performing well and which ones are facing challenges. Are technology names outperforming and consumer stocks lagging? Third, we can start to draw some general conclusions about the economy based on the overall results vs. overall expectations.
“Where there is no guidance, a people falls, but in an abundance of counselors there is safety.” Proverbs 11:14
Show Me How It Works
The two accompanying charts help show how companies paint a picture of the economy with their quarterly corporate reports.
“Trending Lower” shows the number of S&P 500 companies that mentioned inflation during Q1 2024 conference calls with shareholders. The chart suggests that companies in 2024 are still concerned about inflation, but they are less focused on pricing pressures than they were in 2022.2
“Trending Higher” shows the number of S&P 500 companies that mentioned artificial intelligence (AI) during Q1 2024 conference calls. The chart suggests that more companies are providing shareholders with an update on how AI influences their business strategies. What was a passing thought in 2022 is now a key part of the discussion.3
When “earnings season” opens, we expect to hear some upbeat corporate reports but we always brace for some negative updates. If you hear a confusing report, or if you want to know when a particular company is reporting, please give me a call.
FINRA.org, July 23, 2024.The S&P 500 Composite Index is an unmanaged index that is considered representative of the overall U.S. stock market. Past performance does not guarantee future results. Individuals cannot invest directly in an index.
- Insights.FactSet.com, May 17, 2024
- Insights.FactSet.com, May 24, 2024
