When a company goes public, it is required to follow the strict rules laid out by the Securities and Exchange Commission (SEC), the government body which oversees capital markets and protects investors. One of the many rules requires companies to file earnings reports that detail how a company has been performing.

The earnings reports are expected after the end of a company's first three quarters, and both quarterly and annual reports after their fiscal year ends. Note that the fiscal year-end for many companies is not the same as the calendar year-end.

The earnings reports are public records and are intended to keep the company's investors and potential investors up to date on the company's performance as well as to highlight any areas of difficulty. These reports are not only important to investors but also to investment analysts working at banks that provide their judgement and recommendations on public companies.

When a company releases its earnings, there is usually a direct and immediate response to its stock price. When the reports contain good news and match or exceed expectations, the stock usually sees a boost, whereas if the earnings are below expectations, the stock price typically suffers. As such, earnings announcements are carefully watched.

The Timing

The timing varies a little depending on the details. The old standard required companies to file earnings reports no later than 45 days after the end of their first three quarters, and both quarterly and annual reports no more than 90 days after their fiscal year ends.

In 2002, the SEC decided to make information available to the public in a more timely manner. The new rules tightened these 45- and 90-day requirements to 35 and 60 days, respectively.

The faster filing deadlines are required only of the public companies that have a public float of at least $75 million and have been subject to the Securities Exchange Act of 1934 for at least 12 months. The public float is the value of all shares that are in the hands of outside investors.

The Contents

A quarterly report must include a straightforward accounting of a company's gross revenue, net profit, operational expenses, and cash flow. It also generally provides some brief interpretations of the challenges and opportunities of the current quarter from the viewpoint of management.

The annual report must include all of those numbers for the year as a whole. It is a larger, glossier, and more elaborate production, intended for investors and potential investors, and includes promotional material about the company and its products.

Other Earnings Information

In reality, the companies also publish press releases that boil the earnings information down into an easily digestible form. These press releases may cast the previous quarter in the best light possible, but they have to stick to the facts.

In addition, the company's top executives are expected to sit down for lengthy question-and-answer sessions with major shareholders and the media. After the end of the fiscal year, they also publish glossy magazine-style corporate reports that are sent to all shareholders and include the financial information as well as information about the company.

The Forms

The essential SEC requirements are that each public company file quarterly earnings reports on Form 10-Q or 10-QSB and yearly earnings reports on Form 10-K or 10-KSB. 

A company can announce earnings publicly whenever it chooses, provided it follows the timing guidelines set by the SEC.

If you're interested in a specific company, most corporate websites list the release dates of their upcoming earnings reports, and virtually all carry the reports in full.

The Bottom Line

The SEC reporting requirements effectively rule the calendar year of the stock market. Company quarterly reports are eagerly anticipated and are subject to heavy speculation. The reports arrive on schedule and in an avalanche, and each is followed by a wave of expert analysis and trader repositioning.

The earnings are then followed by public conference calls between top corporate executives and active investors in which the prospects for the next quarterly report are discussed, which reboots the anticipation phase all over again.