Wall Street Horizon earnings dates are the most accurate available. There, I said it. Over the past month or two on this blog I have tried creative ways to make that point but today I figured I would stop beating around the bush and just give it to you straight. I also wanted to reinforce why investor conferences are such important corporate events, and why investors, traders and investor relations professionals should also pay close attention to them and the companies that are presenting.
One week from today (Thursday, January 14) and before the markets open, J.P. Morgan will 'unofficially' kick-off the earnings season when it announces its earnings and hosts its conference call. If you recall from last quarter, much ado was made out of the fact that J.P. Morgan scheduled its Q3 earnings announcement for after market hours, instead of before the market opened, as it had done every quarter since at least 2Q 2005.
Those who trade off of corporate events know that when a company delays the release of their earnings it's typically because there is bad news to report.
If you have been reading this blog for the past month or so, or are well versed in the academic research on the subject, you would know that there is some science (and some art) around when companies will release their quarterly earnings.
As of today, approximately 94% of the companies that Wall Street Horizon tracks have announced their earnings for this quarter. What may surprise you however is that only 85% of these companies were announcing their fiscal Q3 2015 results and only 87% had a fiscal quarter end date of September 30, 2015.
Given that companies are not required to host a conference call or webcast to discuss their quarterly financial results, I wondered whether there were any companies that might host a call when the company had good news to report, and not host a call when the company had bad news to report. Here is what I found when looking at the behavior of 978 Fortune 1000 companies going back eight quarters to Q3 2013 . . .
With stock buybacks reaching historic levels in the U.S., Reuters published a very interesting piece on the subject yesterday called The Cannibalized Company. What their research shows is that many companies including HP, IBM and 3M, are spending more on buybacks and dividends than they are on R&D and other forms of capital spending. And what the critics are saying is that while these financial maneuvers may produce short-term gains for shareholders, in the long term they will cannibalize innovation, slow growth and harm U.S. competitiveness.
Over the last couple of years, we’ve seen many independent academic studies including one by Eric So, MIT and another by Joshua Livnat, NYU Stern and Li Zhang, Rutgers, that have concluded that alpha can be generated by trading on earnings date revision data from Wall Street Horizon.
The majority of publicly traded companies pre-announce when they will release their quarterly earnings results. By doing so shareholders, analysts, institutional investors and anyone else interested in the company's financial performance, can get online and wait for that moment when the company's 10-Q gets filed with the SEC and the press release comes across the wire.
This past Monday, November 2, 2015, was the first trading day for the two new Hewlett Packard companies, HP Inc. (NYSE: HPQ) which is operating the PC and printer businesses and Hewlett Packard Enterprise Co. (NYSE: HPE) which is operating the business software, hardware and services businesses. As with all spinoffs, there was a series of corporate events leading up to Monday when the two companies started trading independently. And as the following chart shows, there was significant price volatility around these events that an informed investor or trader could have taken advantage of . . . or avoided altogether.