What You Should Know About Earnings Calls

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Are you an investor who does ample homework on the company stocks in your portfolio, like reading analysts’ reports and relative news items? And did you know? If you really want an ace portfolio, listening to Earnings calls may give you an extra edge other investors don’t have, namely your own instinctive feel for the quality of company management.

Earnings calls will essentially provide an update of a business’ performance from the last quarter. These calls are actually open to the public forum, where in the first few minutes of the call details a general overview, where the executive team will go over the numbers and explain different headwinds that they may have faced in the process. Following this, major analysts ask relevant questions about the numbers and future plans of the company.

The earnings conference call plays an important role for companies, to disseminate information to all stakeholders i.e institutional & individual investors, and buy- and sell-side analysts. Companies conduct these calls immediately following the release of financial results i.e at the end of each quarter. 

Are earnings calls Mandatory?

It is not mandatory to host Earning calls for the companies. Usually, listed companies release the details for their financial performance, but including the earnings are optional. Companies such as MRF largely issue a press statement. Among the Nifty companies, popular giants such as  ITC, Reliance Industries and HPCL do not host calls but either conduct or participate in analyst meets.

How often do earnings calls take place?

Earning calls are usually scheduled quarterly basis. Often, companies announce the date and time several weeks in advance, also release a press release with a high level summary of the quarterly financial statements and other relevant information such as changes in leadership, product upgradation/new launches, alliances/partnerships etc.

Why are earnings calls important?

Earning calls are utilised to provide investors with utmost confidence about their choice of investment. It is used to inform how potential and existing investors look at the company and, and what to do with their upcoming and current investments. Earning calls can be so vital that they can possibly have an immediate impact on stock prices.

Chorus Call India, which commands a dominant share of investor relations calls, has seen its business double in the past five to six years - from around 250 calls a quarter to 500+ calls every three months.

To institutional investors, the calls are quite helpful. It is like a cat and mouse game – with management wanting to stay a step ahead of the analysts and vice versa. For non-institutional retail investors, the earnings call is the only periodical opportunity, besides the annual general meeting, to comprehend the quality of management. It gives a fairer idea about the thoughts, confidence, demeanour & growth ideas of management.

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Why investors follow earnings calls

Investors are looking for strong baskets to safeguard their investments and target steady growth. Earning calls provides them a platter of financial information, peak at industrial growth and confidence in the management. Earnings calls include the dearth of financial data and other insights that influence decision making of potential investors.  Most investors even consider the tenor of how an earnings call unfolds, paying utmost attention to how leadership details out key pieces of data and how they navigate analyst questions at the backend of the call.

Earnings Call and Fundamental Analysis

There is a lot of relevant information offered in the earnings call which helps analysts with fundamental analysis of the company. It starts with the company's financial statements, therefore, analysts will brush through these statements in addition to listening in on verbal cues that management provides with. Analysts even ask questions in reference to industry growth & deprivations. 

Questions & Answers

The Questions & Answers is usually the longest section of the call because it’s the time when analysts and perhaps even an investor will have the opportunity to dig deeper in financial details. Some listeners usually research the analysts - asking the questions, as their past publications of the company and others in its space helps in offering an additional layer of context to the conversation. The host company has the option to not entertain all the questions, and can call upon analysts in their order of preference, prioritizing the most relevant individuals and deprioritizing the rest.

Wrapping up

Now that you know the Earnings call and why you should attend one? It’s only logical that we move on to the next big question -The taxes and finances of Insurance  To discover the answer, head to the next chapter. 

A quick recap

  1. Earnings calls will essentially provide an update of a business’ performance from the last quarter.
  2. Earning Calls are used to inform how potential and existing investors look at the company and, and what to do with their upcoming and current investments.
  3. Earning calls can be so vital that they can possibly have an immediate impact on stock prices.
  4. Earning calls provides them a platter of financial information, peak at industrial growth and confidence in the management.
  5. A lot of relevant information offered in the earnings call which helps analysts with fundamental analysis of the company.
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Comments (1)

Aakanksha Mathur

08 Jun 2021, 05:31 PM

nice content...

Replies (1)
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