Guide to attending earnings conference calls

By: ispeculatornew
Date posted: 09.03.2010 (4:00 am) | Write a Comment  (2 Comments)

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At the end of each quarter, corporations listed on US stock exchanges file their earnings usually prior to trading opening or more often after the close. I try to listen in on these conference calls for the companies that I follow as much as possible. Here is a quick guide:

What?

Conference calls where company executives present the financial and operating activities, comment on future expectations and also answer questions from selected financial analysts

When?

These calls are made 4 times per year, when the company has filed its earnings report.

How?

There are many ways to listen to these but the easiest and most easily accessible are through each company’s website. You can usually find the info in the investor section of the website and these can often be listened to after the fact. I personally don’t think that listening to them before the next day’s trading is that important. I will explain later on.

What do I NOT listen to?

When listening to these calls, these are some of the elements that I do not really care about:

-The actual tone of the executives: These are professionals. Even in times of distress or bankruptcy, they remain calm and composed
Executive opinions about future revenues: Again, these executives are somewhat biaised

What do I listen to?

When listening to these calls, these are some of the elements that I pay most attention to:

Where the growth comes from? Any information about where the growth comes from is a good indication about they keys for the company’s success
Analyst questions: While the questions are always somewhat political (no one is trying to embarass executives), it is still the best opportunity to get more precise answers about subjects that the executives might have preferred to avoid . They will also tend to point out inconsistencies in what was said in the opening statements. Seeing if the executives explain directly or if they avoid answering can be a big hint.
What is the executive’s focus? Revenues or costs? I am always looking for a company that is focused on revenues
What is the company working on? Is it something where it can be competitive?
Questions that executives do not want to answer: Is it because they consistentyly do not want to discuss that subject or is there something more?

How do I use this information?

The thing is that I would not usually do a trade the day following earnings but the information collected in a conference call would help me focus on the right factors in the following weeks and months when juding the stock’s valuation. Knowing that a particular segment of the company is very important will certainly make me focus a lot more on news, traffic and sales as it will have an important impact on the company’s bottom line.

Any other thoughts?

Do you listen to earnings calls and if so, what is your experience in doing so? What do you usually take away from these calls?

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2 Comments

  1. Comment by Zavi — September 3, 2010 @ 5:48 am

    I get to listen a few conference calls. I usually mute the conference because I can do other stuff while listening… I tend to stay away from boring conference calls. I like when there is a moderator, when it is organized (mostly stick to the agenda!!), some questions at the end (always curious to see how a panelist is answering)

    But, for me, the tone of the voice is really important. I stay interested during a conference call if I can relate to the person / the voice.

  2. Comment by IS — September 6, 2010 @ 4:52 pm

    @Zavi – Very interesting! Do you draw anything specific from the tone?

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