FINANCIAL EDUCATION FOR YOUNG PEOPLE šØāšš©āš
Week Commencing 1st August: August Edition
What's happening?
Earnings seasons occur four times a year and fall in the months of January to February, April to May, July and September to November. These are usually a couple of weeks after the final month of each financial quarter (end of December, March, June and August).
Although itās not uncommon for companies to report outside of earnings seasons, large companiesā releases tend to fall within a few weeks of each other, leading to four discernible āseasonsā every year.
Earnings announcements are released outside of market hours so that the reports reach as many people as possible and donāt interrupt the trading day.
Why Does It Matter?
Earnings season gives insights into the outlook of a company and can help you to determine whether to take a position on the shares (or stocks, as Americans call them).
This is why earnings releases are usually accompanied by volatility in a companyās share price, because market sentiment is adjusting to the reports. Even more volatility is expected once CEOs have provided more information in earnings calls.
Market analysts will form estimates of whether a companyās earnings will rise or fall, which can change as it gets closer to the official announcement. If the actual numbers are above analystsā expectations, the market could rise. But if the figures are below expectations, itās likely that the market will fall.
Itās worth noting that this isnāt always the case. Sometimes, the market can move in the complete opposite direction ā rising when the expectations arenāt met, and falling when the earnings exceed expectations.
Itās also important to look at a companyās historical figures for predicted and actual earnings and how the market responded to the reports. This could help you form an educated guess as to how volatility might play out. But be aware that past performance is not a guarantee of future results.
When analystsā expectations of a companyās earnings per share are in line with pre-released earnings guidance for that quarter, there tends to be little volatility. Just remember, the opposite is also true.
Hold Up, What's Volatility?š
Volatility is a term to describe how volatile a company's share price can be, especially if over a short period of time. Volatility also often refers to the amount of uncertainty or risk for investors. This means that the price of the security can change dramatically over a short time period in either direction. A lower volatility means that a security's value does not fluctuate dramatically, and tends to be more steady.
Two Reasons Why This Earnings Season Really Matters
1. The Russian-Ukrainian war will continue to dominate results this quarter, with oil, gas and other commodities still experiencing soaring prices and significant volatility.
2. Another headwind thatāll probably influence results is the fact that inflation looks unlikely to come down soon. This, plus the possibility of a US recession looming, makes the search for both growth stocks and value stocks all the more crucial for investors.
EARNINGS SEASON Q2 2022:
ANNOUNCEMENTS TO WATCH OUT FOR THIS WEEKš
Next week Monday, look out for the following week's earnings calendar, in what will be an equally busy earnings week.
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