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What Is Earnings Season and What Does It Mean for Investors?

The spooky season may be upon us but for investors, earnings season can be tricky. Publicly held companies or those that make shares of their stock available for public purchase, are required to report their financial results quarterly. This time of financial reporting and updating shareholders is commonly called “earnings season.” Maggi Tax shares why this is an important time for investors.

Every publicly held company is required by the Securities and Exchange Commission (SEC) to report financial results after the end of each quarter. The SEC designed this process to promote ethical practices and create transparency for investors. During earnings season, each company reports its most recent financial results, adjusts business expectations for the next quarter, holds conference calls with Wall Street analysts, and may speak with the media to discuss results and projections. Topics like company earnings, profits and losses, balance sheets with assets and liabilities, applicable legal proceedings, and financial analysis of the company’s current condition are included in these financial reports. Company leadership may also weigh in on their goals for the next quarter.

So what does earnings season really mean for you? This critical time can affect investors and stock prices rapidly with three factors: the company’s prediction of the future quarter’s earnings or guidance; the estimates on new customers, earnings, and more made by Wall Street analysts; and how the financial results reported by the company compare to the analysts’ estimates. Meeting or beating estimates can be helpful for stock prices while failure to meet expectations, or missing estimates, can negatively affect stock prices. All of these can lead to more volatility in the stock market because traders will buy and sell more during earnings season.

In the short term, investors with individual stocks are more affected during this period. Because there is more risk in holding only one or a few individual stocks, earnings results have a huge impact on your investments. The best way to combat this is by working with tax professionals to create a financial plan that suits your needs. Contact Maggi Tax here or call (727) 799-1701 to schedule your appointment today.

 

 

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