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Frequently Asked Questions |
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Q. |
What is an earnings news release? |
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An earnings news release presents a public company's financial performance
during a particular quarter and is typically distributed to the public
three to six weeks after the close of the quarter. A company usually
provides a comparison of its current results to the comparable financial
period in the previous year. Most companies will then describe the
factors for the financial results in a quotation from senior management.
The news release may also include a discussion of quarterly highlights,
recent developments, and an outlook for the company. Finally, a corporate
news release traditionally includes a balance sheet and a statement of
operations for the quarter and the year to date.
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Q. |
Why are earnings releases important? |
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Under SEC guidelines dating back to the 1930's and 40's, every public company is required to file quarterly (10-Q) and yearly (10-K) financial reports. Historically, the filing of 10-Q's with the SEC was required within 60 days of the close of that particular quarter and yearly information within 90 days. This process may be subject to significant change. Under the SEC's new "aircraft carrier proposal," the process would be expedited, 10-Q's due within 30 days of a quarter's end and 10-K's due within 45 days of a fiscal year's end. Under SEC guidelines, companies are not required to file or issue financial news releases, but it is strongly encouraged. |
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Q. |
Are all companies required to release their sales and earnings information? |
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Under SEC guidelines dating back to the 1930's and 40's, every public company is required to file quarterly (10-Q) and yearly (10-K) financial reports. Historically, the filing of 10-Q's with the SEC was required within 60 days of the close of that particular quarter and yearly information within 90 days. This process may be subject to significant change. Under the SEC's new "aircraft carrier proposal," the process would be expedited, 10-Q's due within 30 days of a quarter's end and 10-K's due within 45 days of a fiscal year's end. Under SEC guidelines, companies are not required to file or issue financial news releases, but it is strongly encouraged. |
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Q. |
What is a conference call? |
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A conference call is a means - be it via telephone or the Internet - by which a company can interact with a group of interested parties. The most popular type of investor relations conference call is conducted immediately following a financial results news release. In this call, management details a company's financial performance, lists the factors influencing those results and offers some comments on industry trends and long-term strategies. This initial briefing is usually followed by a question-and-answer session that allows analysts and, now more frequently, individual investors and members of the media to gain additional information. During the call, the company must be careful to adhere to SEC disclosure requirements and not disclose any material information that was not discussed in the news release. |
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Q. |
Why are conference calls important? |
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Conference calls can help improve a company's image with the investment community during prosperous periods and restore investor confidence in unfavorable cycles. In a recent study conducted by NIRI, more than 80 percent of public companies conduct quarterly conference calls. The arrival of audio and visual Internet broadcasts, or Webcasts, is allowing management to reach an even greater audience and, through interactive slides, provide a more detailed picture of a company's financial status, industry standing and prospects for the future. This open channel of communication, when offered regularly, also allows a company and its management to communicate a clear and consistent message. |
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Q. |
Who are the people who participate in conference calls? |
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Traditionally, conference calls were restricted to buy- and sell-side analysts and institutional investors. This was due, primarily, to two factors: 1) companies found hosting large conference calls via telephone to be cost prohibitive; and 2) company management feared that individual investors and the media would ask uninformed questions during the question-and-answer portion of the call. Today, the SEC encourages companies to extend conference call availability to institutional, individual shareholders and the media alike. This access is becoming increasingly available as companies turn to the Internet to conduct Webcasts. By leveraging the Web, companies now have a cost-effective way for a larger audience to participate on the call and provide equal access to anyone with a computer or telephone. |
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Q. |
What are earnings estimates and how do they affect stock prices? |
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An earnings estimate is an individual financial analyst's estimation of how a company will perform during a financial period. The analyst bases his or her earnings target on extensive research of industry trends, corporate strategy, a company's past performance and management's guidance. From this research, analysts can make recommendations on projected financial results and stock price performance. Their recommendations can affect a company's stock price, depending on if the company meets, exceeds or falls short of the earnings expectations. |
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