What Is Earnings Season?

Most privately held companies have few financial reporting requirements. If you’re curious whether they’re profitable or what their margins are, you’ll have to take their word for it—assuming they even discuss their performance.

But it’s a different story for public companies that raise investor money in regulated securities markets and trade on exchanges like Nasdaq and the New York Stock Exchange. According to Securities and Exchange Commission (SEC) rules, these companies must follow a strict schedule for reporting accurate quarterly and end-of-year financial results.

The multi-week period following the end of each quarter when most public companies release their earnings reports is known as earnings season. Wall Street analysts, financial media and investors often eagerly anticipate reports from many major firms during earnings season and monitor how they might impact individual stocks and market- and economy-wide narratives.

When Is Earnings Season?

Public companies must file quarterly and end-of-year numbers in SEC Form 10-Q and Form 10-K reports, respectively, according to set deadlines. These deadlines vary based on the reporting company’s public float. Public float refers to the combined value of a firm’s shares held by public investors and excludes those held by officers, large stakeholders or governments, who face certain selling restrictions.

But companies are free to announce their results before they officially file the required forms, and most do so, resulting in earnings season commencing well before the deadline. Since the majority of public companies use calendar quarters (the end of March, June, September and December), earnings season focuses on this schedule. It typically begins the first two weeks after the end of each quarter (namely early/mid-January, early/mid-April, early/mid-July and early/mid-October). There’s no official end to earnings season, but the number of reports slows dramatically as the filing deadline approaches.

Some companies deviate from the standard calendar, generally due to seasonal factors in the operation of their business. Their earnings release schedules follow accordingly. For example, retailers might end the quarter in January instead of December to account for winter holidays and other seasonal sales and returns during the same quarter. Recording sales and returns from this crucial period in different quarters (and perhaps different fiscal years) could greatly distort views of the company’s performance.

What Happens During Earnings Season?

Most companies choose to issue a press release providing basic information about financial performance, including sales and earnings. These press releases often include forward-looking information—an indication of what management expects its numbers will be in the future. If a company does issue a press release, it’s required to file an SEC Form 8-K, which must include the text of the release. This form is necessary anytime a firm announces a major event that could concern shareholders.

Companies usually release their earnings reports and accompanying press releases before the market opens or after it closes.

Many companies also hold earnings conference calls for analysts and investors. During these calls, management might give more color on the quarter, take questions from Wall Street analysts and provide guidance on the company’s future prospects. Some firms have invited non-analysts to pose questions to management during these calls and turned them into popular social events.

Why do companies issue quarterly earnings press releases and hold conference calls when they’re not mandatory? If the results are positive, management is eager to disseminate the numbers as soon as possible. When the information is negative, these communications can provide an opportunity for companies to prepare their investors for bad news before the filing of mandatory earnings disclosures with the SEC. The perception that management is being transparent when delivering less than rosy information could generate credibility and reduce panic-selling among investors. And discussing results before analysts or the media can comment lets the firm provide context to the numbers and can help to create a narrative for how their performance is evaluated.

Some companies will issue an investor presentation deck along with the earnings figures. These pieces are marketing documents and tend to be more optimistic than the text included in official filings.

How Does Earnings Season Impact Stocks?

Earnings season can be a busy and volatile time in the stock market. Throughout the year, Wall Street analysts calculate earnings and revenue estimates for how they expect a company to perform this quarter, next quarter and even in future years. These estimates circulate in the investment community, and several groups track a “consensus” estimate that’s the average for all the analysts covering the stock.

A company beats (exceeds) the estimate or misses (falls short of) the estimate based on how actual earnings or revenues compare to the consensus. If the number equals the estimate, it’s said to be in line. However, sometimes there’s a “whisper number” that differs from the consensus. Market participants might believe analysts are being overly cautious—or optimistic. Or perhaps new information has emerged that significantly alters perceptions about the company and isn’t fully reflected in earnings estimates. This whisper number can become the market expectation rather than the official estimate.

A company’s shares might jump or tumble after investors compare the actual results to estimates. But simply beating or missing estimates isn’t always what moves a company’s stock price. Sometimes a company might beat estimates but provide a dour outlook for the future, leading the share price to drop. Other times a stock that rallied ahead of its earnings release and met expectations by reporting great numbers simply doesn’t have enough new buyers to bid the shares higher, causing share prices to hold steady or perhaps fall.

Why Should Investors Care About Earnings Season?

Potential investors and Wall Street analysts use earnings reports to scrutinize company and management performance and assess their prospects. Earnings season offers investors a chance to determine how a wide range of companies performed in the recent past. Did they achieve their goals? Are profit margins stronger (or weaker) than expected? Is management touting a fresh opportunity or warning of a new competitive threat?

But remember that an earnings report is just one of many tools you have at your disposal for making decisions. While day traders might view large, exciting price swings before and after quarterly releases as profit opportunities, long-term investors often dismiss this volatility as a temporary aberration and instead focus on their core analysis. Just be aware if new information from earnings reports—either individually or in the aggregate—contradicts your current investment strategy.

If you’re interested in getting more actively involved in earnings season, you can find all of a company’s past earnings statements, as well as other important regulatory disclosures, free of charge on the SEC’s EDGAR website. And if you don’t have a background in studying financial reports, see the SEC’s document “How to Read a 10-K/10-Q.”