Stock Market Basics: Understanding the Earnings Conference Call

Once you’ve bought some stock and invested into a company after studying its earnings, management team, etc., the stock’s price can vary over time. Nothing impacts a stock’s performance from time to time more than quarterly earnings. Earnings are reported each quarter and usually let out for public consumption a month after the quarter ends, identified by an individual company’s earnings’ date.

On the same day of earnings reporting, in most cases, a company will hold a conference call. Among the things discussed in a conference call are financial metrics, future prospects, and reasoning behind the positives and negatives of the company’s performance. Those who trade after-hours often use the conference call as a measuring point for whether or not they want to continue investing in the company or not. Some conference calls can be disastrous and result in the stock dropping substantially, but the opposite can be true, too.

You might be interested in knowing technically what a conference call is. A conference call is often best defined as a results earnings call. Administrators of a specific company will provide extensive details on revenues, profit and the reasons behind these gains or losses.

Now you’re intrigued and want to know how to listen to a company’s conference call? If you watch television shows where stocks are discussed you will often be told of how an investment banker is listening in on the live conference call. This often results in a few takeaways being reported.

There are two more common ways in which the layperson is going to be able to listen to a conference call. The first way is through your investment platform. For example, on Fidelity, I can listen to the conference call in its entirety on the companies I invest in. I can choose to listen to the whole call or just parts I am interested in. You can as well, assuming you have the right investment platform.

The other way is through the company’s corporate website where a section is devoted to investors. In most cases I have seen that the investment platform will have the conference call available sooner than the corporate website, since most conference calls are held after business hours. You may be able to call directly into the conference call as it happens, but it is more common to listen to a recorded version after the fact.

What’s so special about a conference call? Why should you bother?

  • Conference calls are only held four times a year to provide current and future investors information on how the company is performing and how the company plans for the future. A high quantity of investors will make decisions to buy, sell or hold stock in a company based on a combination of quarterly earnings and the conference call. If quarterly earnings are shaky and the conference call is weak, investors will often sell their shares in the company.
  • Conference calls feature important administrative members of the company such as the Chief Financial Officer (CFO) or Chief Operating Office (COO) as examples. Listening to them helps you gain a clearer picture on if you should invest or not. Sometimes the conference calls will reference future growth. If the administrator is unclear on how future growth will occur it might be best to avoid the stock.
  • Conference calls discuss financial data you might not necessarily understand. There may not be a substantial breakdown of every financial metric available, but often a general overview is provided so you can follow the company’s projections or changes in projections for the rest of the year based on the current quarter’s reports.
  • Conference calls will often review news about the company during a specific quarter. With all the information available on the internet these days you might have missed something important about the company you’re investing in. Often the start of the conference call will reference such news.
  • Conference calls allow for questions. You may not be able to ask a specific question you want answered, but someone at the conference call might ask it for you. The response a company’s administrative team gives might sway your decision to buy, sell or hold on your shares.
  • Conference calls will often tie information up into a nice little bow that you might need to look at a few different resources to find otherwise.

In short, the conference call is an excellent way to find out more about the companies you invest in or want to invest in. A conference call is a great forum of information to rely on.

This entry was posted in NASDAQ and tagged . Bookmark the permalink.