Why do companies postpone earnings announcements?

By Matt Lee AAA
A:

During the course of a fiscal year, a company will report earnings on a total of four separate occasions: three quarterly statements filed as 10-Qs, and one annual report with Quarter 4 data within, filed as a 10-K. The SEC requires companies to file 10-Qs no later than 45 days after the end of a quarter, and 10-Ks must be being submitted no later than 90 days following a company's fiscal year-end. Occasionally, companies will postpone an earnings release for some unforeseen reason. However, most often, the delay will be a result of the company not completing the report on time due to audits taking longer than expected, inexperienced officers completing their first report and the firm losing some or all of its financial data due to a technical error, fire or theft. Although a company may file a report later than expected, this will sometimes have an impact on its stock price.

If a company announces that it is filing later than expected, investors may take this as a sign of a negative earnings surprise, and a sell-off may follow. Price reductions can be further enhanced by noise traders and technical analysts who may follow those who are selling their stock. The smart investor should keep in mind that the best thing for them to do during a time like this is to consider why the company is delaying its release, and/or wait for information to be released concerning whether management's reasons are valid, and see how the new data corresponds to the original investment thesis.

One possible winner in this scenario is the contrarian investor because the contrarian may pick up the now relatively cheaper stock, which will enhance any gains going forward.

To learn more about earnings, read Earnings: Quality Means Everything, or Everything You Need To Know About Earnings.

RELATED FAQS

  1. What main factors affect share prices in the metals and mining sector?

    Discover the primary factors that influence share prices of companies in the metals and mining sector and how companies can ...
  2. Is residual income considered profit?

    Understand what residual income is and under what circumstances it may be considered profit. Learn how this can benefit personal ...
  3. What is the difference between residual income and savings?

    Discover the differences between various forms of income and their functions, including residual, disposable and discretionary ...
  4. How do I calculate free, discounted and operational cash flow in Excel?

    Take a quick look at how you can calculate a company's operating cash flow, free cash flow and discounted cash flows using ...
RELATED TERMS
  1. Cumis Counsel

    Legal counsel chosen by the insured when the insurer has a conflict ...
  2. TSA Pre

    This program allows travelers deemed low-risk by the Transportation ...
  3. Lilly Ledbetter Fair Pay Act

    A federal law designed to ensure equal pay for all workers, regardless ...
  4. Age Discrimination In Employment Act Of 1967

    A federal statute protecting "certain applicants and employees" ...
  5. Civil Rights Act of 1964

    Landmark federal legislation that prohibits discrimination on ...
  6. Occupational Safety And Health Act

    Law passed in 1970 to encourage safer workplace conditions in ...

You May Also Like

Related Articles
  1. Stock Analysis

    Why Should You Invest In Stratasys Today?

  2. Economics

    The Economic Impact of Better US-Cuba ...

  3. Stock Analysis

    How AT&T Will Rise As America Movil ...

  4. Forex

    Bitcoin's Main Stumbling Block: Navigating ...

  5. Investing News

    Mexicans Unsure about Mexican Reforms

Trading Center