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It’s earnings season, which is when companies release a report of how they’ve been performing in the last quarter. It’s a bit of a mix up of results day and parent’s evening, except the foreboding disappointment is from shareholders rather than parents. Earnings season is quite exciting for investors, as it gives them a chance to see how the companies they’ve got a stake in are actually doing, as well as find new opportunities.
We’ve created an earnings calendar with some of the earnings reports we’re excited to see and some information on how you can invest, if you like what you see. If you’re still wondering what an earnings report is or want to know how to read one, we also have a full guide.
We’re updating this table daily.
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What is a quarterly earnings report?
An earnings report is a report that publicly-listed companies have to release every quarter to give shareholders and stakeholders information about how they’re performing. It gives information about income, earnings per share and sales. This allows investors to get a snapshot of how the company is performing compared with its previous report.
How do I read a quarterly earnings report?
There’s some jargon mixed into the report, so it can be difficult to understand what it is you’re looking at and how it can be useful for you. In the report, you’ll likely find the following information and statements.
- Income statement. This tells you the company’s revenue and expenses over the period, as well as gains and losses of assets.
- Balance sheet. The balance sheet is a statement of a company’s assets, liabilities and shareholder equity. It gives you a good indication of what the company owns and what it owes at one specific time.
- Cashflow statement. This gives information about the inflow of cash to a company from its operations, investments and financing.
- A brief discussion of the results. This is typically from high-level management.
- Information about any expected market risks. This would be anything that might cause the company to make losses of some kind.
The income statement gives you a look at the revenue and expenses of the company. This includes operating revenue (the revenue made from primary activities), non operating revenue (the revenue made from non-core business activities, such as interest from capital) and gains (the money made from the sale of long-term assets, like a vehicle).
“Revenue” doesn’t mean the money is in the bank (known as receipts). For example, a television production company might recognise the revenue from a TV series when the first episode is aired, as they are almost certainly going to receive payment for it, but they won’t be paid the cash for it until the full series has been aired.
The expenses are the costs of the business to operate. This includes the cost of goods sold, depreciation, amortisation, administrative expenses, employee wages, commissions and utilities.
Watch out for the terms “gross” and “net”. These give an indication of the calculation made. Gross is all the money received, while net is the gross revenue minus any expenses.
Depreciation and amortisation
Depreciation is a method of allocating the cost of an asset over its useful life. It’s kind of like buying a car you know you’ll use for 5 years for £1,000 and saying “it’s basically £200 per year”.
Amortisation is a technique used to lower the value of a loan or intangible asset (an asset that isn’t physical, but is still valuable) over a set period, such as to spread out loan payments. In reference to assets, it’s where you expense the cost of an intangible asset over the projected life of it.
The balance sheet is a snapshot of a company’s assets and liabilities at one point in time. It doesn’t show this over time, so you’d want to compare it with previous balance sheets if you want an idea of trends over time.
This will have the value of any assets the company owns, such as factory equipment and vehicles. It includes cash, equity and accounts receivable (what is owed to the company).
You’ll also be able to see the liabilities, which is money that the company owes, such as bills, debts and salaries.
The final thing you’ll see on the balance sheet is shareholder equity, which is the assets minus the liabilities. This is the amount that is due to the shareholders or owners of the business. This is either kept to be reinvested into the business or is paid to shareholders as dividends.
This is the actual movement of cash into and out of the business. In our example of a TV production company above, the revenue would be accounted for when the first episode is aired, but the cash won’t go into the company bank account until the final episode airs. This varies from one show to the next, but Friends had 24 episodes per season, which could have amounted to 6 months.
This essentially allows you to check that the business has enough cash flowing into the company in order to be sustainable. If a company doesn’t have enough coming in to cover its operating costs, it won’t be able to grow.
Why does the earnings report matter?
The earnings report can give you some great insight into the performance of a company. It essentially lets you take a peek at the numbers behind the company to allow you to make a decision. As the companies aren’t able to falsify this information, you essentially get a backstage look at them, without any marketing, although they often release a presentation. Try not to get too invested in the details of these reports, however, otherwise you’ll spend a huge amount of time researching stocks — find some of the key factors that are important to you.
While earnings reports aren’t much fun to look at, it’s definitely worth taking a look at a few to get your head around what you’re looking at. Try to see if you can find some of the above details in them and compare some factors. Eventually you’ll become pro at understanding the ins and outs of the financials of a company.
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