Yield Season: What Traders Should Know

Investors and traders like or hate the earnings season. Because there are four earnings quarters in a year related to a large number of stock price fluctuations.

When is the earnings season?

The income quarter refers to the period when listed companies announce their financial performance, business updates and future prospects.

Generally speaking, the revenue quarter starts a few weeks after the last month of each quarter(March, June, September, December). The company usually releases a press release in the first few weeks of the earnings quarter, and communicates the release time and date with investors.

Alcoa, a major metal engineering and manufacturing company, was one of the first big companies to announce profits, and many investors began to associate its reports with informal earnings.

The earnings season will not officially begin or end, but it is usually considered six weeks later or at the end of the earnings season for the vast majority of S&P 500 companies. P500 constituent stocks reported earnings.

What is the import season related to?

The income report accurately includes the dollar amount of the income(or loss) realized by the company in the latest quarter. The company also divides earnings per share, that is, its profit, by each common share.

The income report also includes financial indicators such as income and gross profit rate. Before the announcement of the results, many Wall Street analysts estimated the company’s forecast report.

The earnings report itself follows the format of a press release. The first paragraph usually includes the company’s actual income, income and gross profit margin, and makes a brief comparison with the same indicator recorded one year ago.

The first paragraph may contain important indicators of investor or company stories. For example, in a recent financial report, Apple said that international sales accounted for 67% of its total revenue in the quarter.

The growth of Apple’s international market, especially in China and India, is considered to be the next growth point of the company, which is more important for some investors than domestic sales.

The following paragraphs may include a simple reference to the company’s performance as CEO.

Secondly, the next part may include new developments that investors need to pay attention to, including changes in dividend payments, share buybacks or acquisitions.

For many investors, what is more important is the company’s guidance or forecast for the next quarter, the year and the next few years. This provides a better snapshot of the company’s health and sets standards for the company.

Example Guide 1) Company X expects the revenue of the whole fiscal year to be between 250 million and 260 million dollars, 2) Company Y expects the gross profit margin of fiscal year 2018 to be between 41.5% and 43.0%, and 3) Company Z expects the operating expenses of the next quarter to increase by 10% over the same period last year.

Finally, the Company will include consolidated business reports, balance sheets, cash flow statements and other accounting information deemed necessary.

Earnings report release teleconference

After the company announces its financial results, the management will hold a teleconference, which will be open to investors and non investors. The real-time streaming media link of the teleconference is also transmitted to the investment community through the company’s investor relations website.

The teleconference includes further comments and analysis of the results of the report, a comprehensive business overview and update of new developments, markets, products or acquisitions.

Ignoring teleconferences and focusing only on financial indicators may prove to be a big mistake of investors.

For example, David Ebersman, Facebook’s chief financial officer, said in his prepared speech at the conference call in the third quarter of 2013: Especially among young teenagers, we do see a decrease in daily users.

This means that Facebook’s management has admitted for the first time that it faces headwinds in its core market. Before Eversmann’s comments, Facebook’s share price rose about 15%. However, the words of Senior Manager Li wiped out all the earnings of the stock, and the stock fell to a negative range thereafter.

Coincidentally, Facebook then stopped commenting on teen use during a conference call.

If the management is ready to make comments, Wall Street analysts can explain quarterly performance indicators and ask questions from any aspect of the company’s business.

The power of the revenue season

Groupon, an e-commerce company, provides discount products or coupons to connect consumers with businesses.

In the environment of intensified competition and the possibility that larger Internet peers such as Facebook or Google can easily enter this field, the company’s relevance in the network field has been questioned by investors.

On Wednesday, July 27, Groupon announced its second quarter results.

Before the earnings were printed, the company’s shares traded at less than $4 a share. After the announcement of the results, the company’s share price rose nearly 25%, reaffirming the company’s importance and bright prospects in the online market.

Groupon said in its earnings report that it lost only 1% per share in the quarter, and its revenue increased 2.4% year on year to $756 million. The company also provided guidelines, saying that its annual revenue is expected to be between $3 billion and $3.1 billion, which is an impressive figure compared with the forecasts of many analysts.

For non-financial indicators, Groupon said that more than 1 million new customers were added in this quarter, the highest growth level in more than two years.

After the shocking earnings report, the stock continued to rise in the subsequent trading period, rising nearly $2 per share in a few weeks, reaching the highest level of $5.94 in more than a year.

Bottom line: Be aware of this

The earnings season is an ideal opportunity for investors to check their investment, listen to the management’s opinions and re evaluate their views on the company. One aspect of the earnings season may give investors a deceptive view of the company, which is often ignored by investors.

In retrospect, the earnings per share of a company is only the total number of ordinary shares of the total earnings of the issuing company. There are also many companies that implement stock repurchase plans, through which they buy their own shares in the open market; retirement “; stock.

For example, suppose a company owns 1 million shares of outstanding stock, and its income is $1 million. Each stock represents an income of one dollar. Assuming that the company has purchased 100000 shares of the company, it will maintain a profit of $1 million after one year.

What about the new EPS? At first glance, earnings per share now account for a higher proportion of total earnings, so it has improved. In fact, the EPS indicator has only been improved on the documents, which may give a false impression that the enterprise itself is improving. In fact, it has not improved(or decreased) in a year.

If investors do not consider stock repurchase and only focus on the reported earnings per share, the conclusion may be wrong.