A Guide to Reading an Earnings Report
A quarterly earnings report is a filing generated by public companies. These earning reports indicate the financial wellbeing of the company. Investors make decisions on whether to invest in a company or not. So understanding and analyzing quarterly earning reports is an important skill to be developed for each investor.
Earnings report consists of information such as earnings from continuing operations, net sales, net income, and earnings per share. The quarterly earning report consists of three financial statements. These are the balance sheet, the income statement, and the cash flow statement. The investors, while reading the earning report are able to know three things. The overview of sales, net income from the most quarter year, and expenses. The CEO or the spokesperson of the company may also include a short summary in the quarterly earnings reports. It might also include a brief summary of the results of the previous quarter as well.
Analysts and investors always eagerly look forward to the company earnings report to be published. The stock market is prone to large fluctuations on the days when the companies publish their earnings report.
Quarters
In a financial calendar of a company, a quarter consists of three months. A financial year of a company is made up of four quarters – Q1, Q2, Q3, and Q4. In most companies, reporting and dividend payments are implemented on a quarterly basis.
Most of the companies release their earnings report filing by following the schedule given below:
- End of the month of March
- End of the month of June
- The End of the month of September
- End of the month of December
Earnings Estimates
Estimates are approximate values of how well a company could perform in the upcoming quarter. These include metric values such as revenues, sales, and earnings per share. The company is said to have beaten the estimates if it is able to successfully outperform these estimates. If a company fails to outperform these estimates analysts declare that the company has missed the estimates. These outcomes are some of the factors that affect the company’s stock prices in the stock market.
Analyzing the press release that is published with 10-Q forms is a great method to scrutinize the performance of the company in the previous quarter.
Company Revenues and Company Expenses
Company expenses are the total amount of money that a company has spent in a quarter. This information is an important constituent of the earnings report. The company’s revenues are the total amount of money the company has earned in a quarter. Like the company expenses, company earnings are also an important element in the earnings reports.
Earnings per share
Earnings per share are the metric value of each share of the company in the stock market. Also, earnings per share are often analyzed by the media and financial analysts.
Another important section that could help the investor to earn some insights about the company is the management discussion section. This section has assessments from senior executives of the companies. Earnings reports should be examined thoroughly before making an investment.
