What Is an Earnings Call?
Earnings call is a conference call between the management of a public company, analysts, investors, and the media to discuss the company’s financial results during a given reporting period, such as a quarter or a fiscal year. An earnings call is usually preceded by an earnings report. This contains summary information on financial performance for the period.
Earnings Call Explained
The vast majority of listed companies host earnings calls to discuss their financial results although small companies with minimal investor interest may be the exception to the rule. Many companies provide a phone recording or presentation of the earnings call on their corporate websites for a number of weeks after the actual call, making it possible for investors who could not log in to the call to access this information.
Earnings Call and SEC Forms 10Q and 10K
During an earnings call, company management discusses the details of its SEC Form 10-Q (quarterly report) or 10-K (annual report). Federal securities laws mandate that publicly traded companies provide certain information in these forms, including detailed financial results, along with a more qualitative discussion.
The MD&A section (management discussion and analysis) usually provides the most comprehensive discussion of financial results and other performance metrics. It will generally dig into the reasons behind certain aspects of growth or decline on the company’s income statement, balance sheet, and statement of cash flows. The MD&A will discuss particular drivers of growth, risks that investors face when purchasing shares or extending loans, and even pending lawsuits. Management also often uses the MD&A section to announce the upcoming year by outlining future goals and approaches to new projects and initiatives, along with any changes in the executive suite and/or key hires.
Earnings Call and Fundamental Analysis
Analysts use information they learn in the earnings call in fundamental analysis of the company. Fundamental analysis begins with the company’s financial statements. Analysts will comb through these statements in addition to listening in on verbal cues that company management gives during the earnings call. Analysts may ask questions during an earnings call related to main concepts or even details in the footnotes that focus inventory and "less accumulated depreciation" lines.