What are quarterly reports and how do you read them?

Quarterly reports can be used to make decisions about your stock investments. But what are quarterly reports and how do you read them?

What are quarterly reports?

Quarterly reports show how a company has performed at the end of three months within the fiscal year. This will coincide with a calendar year for almost all companies, but if there is a broken fiscal year, it may be different.

How often are quarterly reports published?

The rules on quarterly reports vary depending on where the company is listed:

• Europe: a listed company must share figures at least once every six months, more often is allowed.
• America: a listed company must share its figures every quarter.

A company has up to six weeks after the end of a quarter to publish its figures:

• Quarter 1: covers the period of January-March and is published no later than mid-May.
• Quarter 2: covers the period of April-June and is published no later than mid-July.
• Quarter 3: covers the period of July-September and is published no later than mid-October.
• Quarter 4: covers the period of October-December and is published no later than mid-February.

How can you use quarterly reports?

Annual reports show how a company has performed over a year. Quarterly reports can be used to analyse whether the company is achieving its objectives.

For example, if the company indicated that it expects to win a lot of orders, but they are not visible in the first quarter results, then you should be careful.

Analysing quarterly reports

Before you can analyse quarterly reports, it is important to investigate when they are published.

Once the quarterly reports are released, you can compare them with the figures of the competition. Especially, companies in the same sector lend themselves well to comparisons.

When reading quarterly reports, pay attention to the following figures:

• Revenue: Is the revenue increasing compared to previous years?
• Net profit: How much profit does the company make after deducting all costs? Also pay attention to the profit margin; this is the percentage of revenue that ultimately becomes profit.
• Earnings per share: How much of the profit goes to one share. This can be a good indication of the amount of dividend that will be paid out.
• Other figures: For example, at Netflix, you can look at the growth (or decline) of the number of users.

What happens after the publication of the figures?

The publication of the semi-annual and annual figures always happens with a press conference together with often the CEO and the CFO. Here, as an investor, you can gain more insight into the developments within the company in the past few months. It is wise to pay close attention to:

• The order intake
• The debt position
• The liquidity

During the presentation, the press, and investors can ask critical questions. Pay close attention to the words of the management; they can give you information about the performance of the company.

Quarterly reports that influence the prices of other companies

Quarterly reports can also influence each other. For example, when an oil company indicates that it has incurred losses due to a low oil price, shareholders of other oil companies may decide to sell their shares as a precaution. They fear that those oil companies will also perform poorly.

This was seen, for example, in 2023 when the American FedEx released a negative prognosis. Other postal companies also immediately experienced falling share prices.

Expectations and forecasts

The announcement of quarterly reports of companies is something that every investor looks forward to. The published figures provide a lot of information about the company’s performance.

Many involved parties provide forecasts and expectations of the figures. Sometimes, the management of the company also guides the results. These forecasts have a lot of influence on the eventual price movement:

• If the results are better than expected: the price often rises.
• If the results are worse than expected: the price typically falls.

When a company achieves results that are lower than the expectation, the stock price can still fall. At the same time, a company that incurs less loss than expected can experience a rising stock price.

If you want to actively speculate on quarterly figures, you will need to open a position before the figures are released. Of course, you can also decide to open a position only after the figures have been released. It is important to remember that the information is then publicly known and that the market has already reacted: the results have already been priced in.

Investing during Earnings Season

You can actually speculate well on the stock market during the periods when quarterly figures are released. Stock prices typically react strongly to disappointing and positive figures. Do you want to actively speculate on new quarterly figures that come out? Then it might be interesting to open a demo account with a broker:

With a demo, you can try out speculation completely risk-free. This makes it possible to discover if investing is right for you.

Auteur

Over Alex Mostert

When I was 16, I secretly bought my first stock. Since that ‘proud moment’ I have been managing trading.info for over 10 years. It is my goal to educate people about financial freedom. After my studies business administration and psychology, I decided to put all my time in developing this website. Since I love to travel, I work from all over the world. Click here to read more about trading.info! Don’t hesitate to leave a comment under this article.