how an earnings call works
the term earnings call is a combination of a company s report of earnings such as its net income or earnings per share and the conference call to discuss results earnings calls often begin with the moderator issuing a safe harbor statement which advises that the call may include forward looking statements 1the vast majority of listed companies host earnings calls to discuss their financial results although small companies with minimal investor interest may be the exception to the rule many companies provide a phone recording or presentation of the earnings call on their corporate websites for a number of weeks after the actual call making it possible for investors who could not log in to the call to access this information earnings call and sec forms 10q and 10kduring an earnings call company management discusses the details of its sec form 10 q quarterly report or 10 k annual report federal securities laws mandate that publicly traded companies provide certain information in these forms including detailed financial results along with a more qualitative discussion the md a section management discussion and analysis usually provides the most comprehensive discussion of financial results and other performance metrics it will generally dig into the reasons behind certain aspects of growth or decline on the company s income statement balance sheet and statement of cash flows the md a will discuss particular drivers of growth risks that investors face when purchasing shares or extending loans and even pending lawsuits management also often uses the md a section to announce the upcoming year by outlining future goals and approaches to new projects and initiatives along with any changes in the executive suite and or key hires earnings call and fundamental analysisanalysts use the information they learn from the earnings call in fundamental analysis of the company fundamental analysis begins with the company s financial statements analysts will comb through these statements in addition to listening in on verbal cues that company management gives during the earnings call analysts may ask questions during an earnings call related to main concepts or even details in the footnotes that focus on inventory and less accumulated depreciation lines advantages and disadvantages of earnings callsearnings calls can provide a wealth of information for investors analysts and members of the financial community what s released during the earnings call can help analysts in their fundamental analysis of the company if allowed some participants may present questions to be answered by the company s representative or executives during the call the questions may yield valuable information that can enhance the company s image however some questions may be about topics management does not want in the forefront thereby damaging the company with earnings calls investors quickly receive the information they want without having to scour through dozens of report pages to find it also they often schedule trades close to the earnings call and how they trade is dependent on the information released preparing for the earnings call can take time and command significant resources this commitment may come at the expense of normal business operations also once a company hosts an earnings call it must continue to keep the investment community engaged this means that it must continue these calls to prevent investors from thinking something is amiss helps with fundamental analysisguides investors decisions on tradingallows participants to ask questionsstrains normal business operationsq a could produce unfavorable resultsmust establish a regular cadence to prevent negative speculationexample of an earnings callon april 28 2021 apple aapl held its 2nd quarter 2021 earnings call with ceo tim cook cfo luca maestri other company executives and analysts from other large companies such as morgan stanley evercore ubs and bank of america 2tim cook and luca maestri discussed the company s outlook on future revenues income expenses and plans for its capital tim cook highlighted the prior quarter s performance noting a significant increase in revenues he also boasted about iphone and mac s performance as well as that of wearable products like the apple watch and services like apple tv shifting the focus from its offerings tim cook spoke about the company s commitment to the environment and its focus on the u s economy in a quest for a net zero carbon footprint by 2030 apple plans to introduce approximately eight gigawatts of clean energy and continue supporting environmental projects globally regarding the nation s economy it plans to invest more than 430 billion which will result in approximately 20 000 new jobs luca maestri expanded on cook s message by providing concrete figures he celebrated their record breaking performance of 89 6 billion in revenues recorded for q2 a 54 increase compared to the same quarter of the prior year in greater detail he dissected revenues by segment attributing 47 9 billion of the quarter s revenue to iphone sales and 16 9 billion to services such as app store purchases cloud services apple music and more citing a remarkable performance maestri shared how apple returned more than 23 billion including 3 4 billion in dividends and 19 billion as open market repurchases of apple stock to shareholders during the march quarter looking forward the company expects the june quarter to not mirror the spectacular march quarter performance due to delayed launches and supply constraints gross margins are expected to be slightly below 50 and operating expenses are to be approximately 11 billion analysts asked questions about reviving the existing customer base and attracting new customers pricing forward looking initiatives drivers for its high gross margin 42 and the unexpectedly high performance in its services division in addition to the company s performance and outlook on revenues and expenses they were asked how their plans for the u s economy would affect the company s expenses to which maestri reflected on the company s dedication to the goal how much more revenues increased over its operations expenses in the prior quarter and its plans to continue investing into the business earnings call faqsan earnings call allows a public company to discuss its past performance and future plans as well as answer questions from analysts investors and media personnel before listening to an earnings call it is helpful to prepare to get a better understanding of what to listen for and what s particularly important to investors and analysts 3 listen to the company s previous earnings call and read subsequent analysts reports to gain insight into the company s performance then review the earnings press release which is usually published before the call this can provide valuable information such as benchmarks and plans for dividends as you listen to the earnings call pay attention to the results benchmarks plans and risks afterward you can analyze the call management s tone the results and the answers to analysts questions there is no prescribed time length for earnings calls however most last less than an hour 4 earnings call recordings are typically published on the company s website for a specific time such as two weeks the transcripts are often available for a longer period however you can also find recordings and transcripts on investment websites if an earnings call is not available the next best alternative is to review the company s earnings report on its website or the securities and exchange commissions s sec website the bottom linean earnings call is a conference call between company executives and the financial community on this call management reviews the company s performance for a specific period as well as potential risks and future plans at the end of the call analysts and investors are generally welcome to ask questions which can help in their fundamental analysis of the company 