What is a Earnings Call?

Earning call refers to a conference call that focuses on the financial accomplishments of the organization within a specific period of time, be it on a quarterly or annual basis. The participants of this call include managers of a public organization, investors, media, and analysts. Before initiating the earnings call, the company analyzes its earnings report that tells about the financial position for a given period.

How Does an Earnings Call Work?

Earnings call is a perfect amalgam of the earnings report of a firm and the conference call made to observe and analyze the financial results. Usually, the report of earnings gives information on the net income or EPD (earnings per share) for the company. Most of the listed companies consider using the approach of earnings call for sharing insights about the financial reports. However, small scale firms having a minimal number of investors may skip following this approach. In order to ensure that every investor or analyst gets a hang of the financial information of the firm, every company records their earning call and further presents or publishes it on their official website. They retain this recording for several weeks after the actual earnings call has been made.

Earnings Call and SEC Forms 10Q and 10K

When a company makes an earnings call, its management touch bases details of its SEC Form 10Q which includes a quarterly performance report, or 10-K form that includes a yearly report. As per the federal securities rules, publicly listed firms must offer specific information such as financial results, qualitative insights, etc. in one of the selected firms. The MD and A section, also referred to as management discussion and analysis, offers the most detailed information on financial reports and other determinants of performance. It will analyze several factors resulting in the profits or losses made in the financial statements such as income statement, balance sheet, and cash flow statements of the company. The MD&A will also analyze the factors of profitability and risks experienced by investors at the time of buying shares or making loan extensions, and also due court cases. Besides, managers use this section for stating the prospective targets and objectives in the coming year. They further inform about the strategies to be followed for exclusive projects, and also mention about any editions made in the executive level.

Earnings Call and Fundamental Analysis

Analysts utilize the insights provided in the earnings call as a tool to conduct fundamental analysis of the organization. This type of analysis commences right from the financial statements of the firm. While going through financial statements, the analysts pays attention to the oral information provided by the company's management during the earnings call. Analysts can put questions on major concept or even ask the managerial committee to put more light to anything mentioned in the footnotes. Analysts usually have straight-forward questions requiring detailed answers during earnings calls.