What is Earnings Season?
Earnings season refers to the time period during the year or “season” when publicly traded companies release their quarterly earnings report. These reports are typically released during January, April, July, and October because companies need some time to gather their most recent quarterly data and present it to the public.
Most NASDAQ and NYSE listed companies will announce an official earnings date either pre-market or post-market and submit the following information:
- 10-Q quarterly report: An official SEC quarterly report that explains how the business is doing.
- Shareholder letter: Some CEOs will write a short letter to shareholders.
- Quarterly Presentation: Many companies create a visual slideshow presentation to help show company performance
- Quarterly earnings call: Key executives such as the CEO, CFO, and others will join a virtual conference call with Wall Street analysts and discuss how the business is performing.
When is Earnings Season?
Here are the general date ranges for earnings season:
- First quarter (ends March 30): April 15 to May 31
- Second quarter (ends June 30): July 15 to Aug. 31
- Third quarter (ends Sept. 30): Oct. 15 to Nov. 30
- Fourth quarter (ends Dec. 31): Jan. 15 to Feb. 28
Earnings season for Q2 2022 begins in mid to late July 2022 with a number of companies reporting their Q2 earnings results.
Historically, banks and big tech companies such as Netflix kick off earnings season and give investors a broad sense of how things will play out. There is usually a lot of volatility in the markets during earnings season so many bigger companies prefer reporting their results after market hours to avoid major swing in the stock price.
Of course, it’s not unusual to see a major price swing during the next trading day as investors digest the news.
Why is Earnings Season Important?
Earnings season provides important data about the overall economy, corporate earnings, and how well specific companies and/or sectors are doing every 3 months.
Many popular stocks experience wild swings of around 25% or more if a company exceeds or misses its earnings estimate.
For example, Netflix stock crashed 35% in 1 day and shed $50 billion in market cap after losing subscribers during Q1 2022 for the first time in over a decade. If you owned Netflix stock heading up to the earnings call then you suffered substantial losses.
Sometimes, you can benefit from selling the stock just before the earnings release if you expect a negative report. You can always buy the stock back at a cheaper price post earnings.
How Earnings Season Affects the Stock Market
Investors pay attention to earnings from several major companies such as Meta Platforms, Facebook, Alphabet, Bank of America, and other major companies to gauge how the broader economy is performing.
Also, certain companies are considered leaders of their respective industry and will bring down smaller related companies if the big player has an earnings miss.
How to Profit from Earnings Season
I enjoy trading options during earnings season because you can profit handsomely from all the market volatility. Here are several earnings season trading strategies that you can use to make trading profits.
- Pre-Earnings Call & Put Options: Buying puts or calls before earnings is a way to profit from extreme stock market volatility. Using the Long Straddle options strategy is a good move to profit from big moves in a specific stock or ETF.
- Buying Long Shares: If you think a company will perform well during earnings then simply buy the stock a few days or weeks before the upcoming report.
How to Track Earnings Season: Best Earnings Calendar Sites
With so many companies reporting, you need a reliable earnings calendar to keep track of everything. I use EarningsWhispers and look for their weekly earnings calendar post on their Twitter feed to give myself a visual aid of what’s coming soon.
Earnings season is a lot of fun and there will be tons of volailitity in the markets.