Earnings reports are just one piece in the complex machinery that makes financial markets move. They give a glimpse of how information flows between various players in the market. Simply put, the financial results that companies publish in earnings reports season inform analyst recommendations and, ultimately, how the stock trades. Observing this unfold can make you a well-informed investor, although it’s important to note that earnings reports season can make stock prices volatile and therefore you may want to avoid making long-term investment decisions based on short-term news.

Most publicly traded companies typically release their earnings reports in January, April, July and October, shortly after the end of each financial quarter.

The influence of earnings reports on stock price has more to do with how expectations line up with actual results, than with a company’s performance. For example, a stock can become volatile if earnings reports reveal a different picture of the company than what investors expected or experts predicted, either in a positive or negative way. That difference between expectations and reality can translate into a high trading volume within a short time. But if, for example, a company is expected to have negative results and the quarterly earnings report confirms this, then its stock price won’t necessarily fall.

EPS (earnings per share) is one of the most important indicators you should focus on as an investor when analysing a company’s earnings report. It shows how much money the company has made divided by the number of stocks that are in the company. Since EPS is a measure of profitability, it can be a good indicator for an attractive investment. However, a company’s EPS should always be considered along with other key metrics such as company assets, liabilities etc. 

Earnings reports can impact stock prices both before and after they are released. Before release, analysts and investors try to predict results and as such create expectations for changes in that company’s value, which in turn influences the stock prices. Once the earnings report is published, the stock price can be once again impacted by whether the company’s results match the expectations or not, or by news from the management.

Companies that are listed for public trading must report their quarterly earnings in an effort to keep their shareholders informed about how the company is doing.