When the heck is Earnings Season?
After seeing in various market report comments like “the market may be volatile in the short term because it’s earnings season”, “markets remain quiet as earnings season awaits”, I wondered just when and how long the “earnings season” actually was.
It’s actually “earnings seasons”, plural.
According to Investopedia, in general, each earnings season begins one or two weeks after the last month of each quarter (December, March, June and September) and lasts for perhaps six weeks. The majority of public companies release their earnings in May for the March quarter, August for the June quarter, November for the September quarter, and February for the December quarter.
And with so many companies publishing their results – if you’re looking at the US, there are about 2,800 companies companies listed on the NYSE alone and another 3,000 or more on NASDAQ – there is a huge increase in the flow of information coming into the market.
And, given that according to a lot of what you read will tell you the market “runs on earnings”, this new information creates fast price movement as traders get jittery while focusing intensely on whether results have met analysts estimates (reported as earnings per share or EPS).
Attempting to try and “catch a falling knife” during these volatile periods is an option and this is likely a great time for making profits. But, if nothing else, it’s obvious that if you are trading during an earnings season, it pays to be extra cautious – aware there’s more speculation and rumors – and be prepared for some wild swings.
(And, on a side note, it seems that earnings season usually provides a boost to buybacks and a study by the Indian School of Business looking into the question Do Firms Buy Their Stock at Bargain Prices, showed that for smaller firms on the S&P 500, “repurchase activity is followed by a positive and significant abnormal return which lasts up to three months after the repurchase”).