Earnings season is an important time for investors and analysts alike. Investors use this time to decide if they want to buy new stock or sell their current stock. Analysts, on the other hand, gauge their estimates against the company’s performance and make new predictions for the next earnings season. With so many news sites reporting on earning reports, it can be challenging to decide which one to trust.
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When are earnings announced?
Most companies prefer to use the traditional calendar as their fiscal year. Because of this, a lot of them report their earnings around the same time every year. These periods are known as earnings seasons. However, not all companies use the traditional calendar, so that a company might report earnings in between the earnings season. The reason for this is that some companies choose to place their fiscal year-end at a time that best suits their business. This way, they can minimize the effects of negative seasons.
Stock earnings release dates are usually mentioned on an earnings calendar which is the schedule with release dates of financial reports.
When does earnings season start?
Earnings season typically starts two weeks after the end of a quarter, which is the middle of January, April, July or October. The earnings are referred to as Q1, Q2, Q3 and Q4, respectively.Q4 earnings are the most important as they relay results for the whole year giving analysts and investors an idea of its progress.
Traditionally, aluminum producer Alcoa (NYSE:AA) is the first to release its reports, after which other companies join in. Earnings seasons are considered over six weeks after it starts when most major companies have released their reports.
Why care about earnings season
During earnings season, publicly traded companies release their earnings reports, which is a good thing for investors as it helps them decide what to do with their shares. In case of a bad report, many shareholders opt to sell out.
The result a company releases has an enormous impact on it. A good report brings a company more investors that increasing the value of its shares while a bad report makes it lose investors.
Manipulation of financial statements
Despite efforts by the Securities and Exchange Commission (SEC), accounting fraud is not uncommon. Therefore, investors and analysts must learn to spot the methods companies use to deceive them. Companies can commit accounting fraud when their earnings are bad to give investors the illusion that they are performing well.
One way companies can manipulate financial statements is by deflating costs in the quarter or by inflating profits. Some companies choose to do the opposite to make them seem like they perform worse than they are. This move will make the company appear to do better as time goes on. Some companies have been known to delay expenses, so they are not relayed in their report. Other methods include recording gains from a current quarter, recoding nonexistent revenue, shifting current income to a later period to be used when revenue goes down.
All these attempts to lie to the public are illegal. However, some companies have learned to use loopholes in guidelines to their advantage. That is why you need to learn how to spot tricks in a report.
It is essential to pay attention to earnings seasons if you want to make money as an investor. To help you, we publish articles on the upcoming season and recent announcements for significant companies. Follow us now to get the latest earnings announcement today.
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