Once again earnings season is upon us. So what is it that you should look out for during earnings season and what is it that propels share prices forward and not back?
Earnings season is the final scorecard for a company. It sets the tone and sentiment for the next quarter, if not the next year.
This is the season where analysts are in the office until midnight eating pizza and pouring over the financial statements, hoping to dissect it before the market re-opens the next day.
It's where market adjusts to the pile of new information that is released in one thick report.
We've just finished confession season. This is before earnings season where companies that think that they are going to miss forecasts come out and 'confess' their wrong-doings.
The upcoming earnings season runs from August to September and is the big one for companies whose financial year ended as of 30 June.
For companies that finish their financial year in line with the calendar year, they will be reporting half year results.
All in all, there are three key pieces of information that you want to pick up from a company:
The first thing to look for is the actual earnings result and how different it was from market expectations.
Better than consensus is good, worse than consensus is bad.
Where do you get consensus information and actual versus forecast results?
Where to find consensus info on belldirect.com.au
You can find out about actual versus forecast results from analysts by going to 'Research & Tools' and choosing 'Financials & Forecasts'.
Next, watch out for changes the management in a company may have in store. This can range from a cut or increase in dividends, capital raisings or restructures. All have the potential to move share prices.
Where to find news and upcoming info on belldirect.com.au
On every Quote page you'll see News, Announcements and Upcoming Events. These are updated in real time with Bell Direct.
But the most important thing to pick up from earnings season is the outlook for the company in the next period. This is because share prices are based on future expectations.
When analysts value companies, most of it is based on what they think that the company is going to earn in the future.
Any clues that the management can give in relation to that will form part of the case in re-valuing a company.
Where to find company outlook info on belldirect.com.au
Not only can you find out what the analysts are saying with consensus recommendations, and see company news and announcements, you can also gain insights from the new tools in our 'Ideas' page – here you'll find great trading ideas like 'Unusual volume' and 'Director's interest'.
Find out more in 'What's new?'
Going into this earnings season, the market will be hoping to see signs that the worst is over. The last earnings season was characterised by earnings missing consensus forecasts, cuts or cancellations of dividends and no outlook or forecast given.
This earnings season, the market is hoping to see more forecasts given and more transparency in what is happening in the underlying business.
All in all, this is one of the most exciting times on the sharemarket. It is also one of the most volatile. Share prices can move very quickly if bad or good news is released.
You see pivotal points on the chart around this time and the change in trend direction of shares.
Remember that the information that is likely to move share prices most is information related to future performance and future earnings. After all, that is why we usually buy into shares.
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Happy investing!
Julia Lee Equities Analyst Bell Direct
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