After every financial quarter, investors and analysts eagerly wait for the largest companies to report how well their businesses have performed over the previous three-month period. Companies announce their quarterly finances, the state of their respective sectors and whether they beat investors’ initial expectations.
But not only do they announce how well they’ve done in the sales of products or services for the previous quarter, they also offer an indication of their future earnings. This allows investors to gauge whether or not they’ve over- or underestimated the value of the company before the announcement.
So how important is earnings season when it comes to investing? Well, considerably. Howard Sparks, US Equity Research Analyst at Coutts, explains: “Earnings are a fundamental building block of a company’s share price value, therefore the equity market as a whole.”
And he adds: “Like much of the world of investing, the US market is a key focus point with all eyes on the region to dictate the mood for the quarter.”