With another earnings season largely behind it, Wall Street can take a breather from the daily onslaught of corporate profit reports. But it won't be long before the focus becomes next quarter's results - and when those results will be unveiled.
At the end of every quarter, thousands of companies report their results at varying times of the day and at different points of the earnings season. While the timing is usually driven by regulatory requirements and fiscal calendars, some companies strategically time their releases in an attempt to drive the conversation in the industry, give investors a chance to digest the numbers or accommodate for late-sleeping analysts on the West Coast.
On the other hand, execs bracing to explain away disappointing numbers may want to report in the middle of the pack -- and after the closing bell -- to allow for a lengthy conference call and to give investors a chance to sleep on things before selling.
“If you have market-moving news, you need to be very, very diligent about how that information crosses the wire,” said Lynn Tyson, who formerly ran the investor relations departments at Dell (DELL), Pepsico (PEP) and KFC parent Yum Brands (YUM). (Dell will report its results on Tuesday night.)
Not everyone sees the value in strategically timing the release of quarterly results, however.
“I’ve never been one to really monkey around with these things much. Those that do, is it really worthwhile?” said Steven Bragg, author of Running an Effective Investor Relations Department.
The biggest earnings scheduling debate is whether to take the earnings stage before the Big Board opens at 9:30 a.m. ET or after it closes at 4 p.m. ET.
Before the dawn of the Internet age and the dot-com boom, most companies opted for a morning release because they sought to cater to the newspaper-driven media cycle.
“That argument is far less relevant now than it was 15 years ago,” said Tyson, who called herself a “staunch believer” in the afternoon release.
By reporting after the closing bell, company execs have the opportunity to hold a conference call with analysts and reporters to help shape the market response to their results. This can often include explanations for results that failed to meet Wall Street’s hopes or commentary that give investors vital “color” on what to expect in the coming quarters.
On the other hand, companies that report in the morning may be stretched for time in holding a lengthy conference call before the opening bell rings.
It’s no coincidence that the vast majority of technology companies like Google (GOOG) and Apple (AAPL) wait until the afternoon. After all, many tech companies are based in Silicon Valley and are just coming to life when the New York Stock Exchange and the Nasdaq Stock Market open. The same is often true for the analysts from sell-side brokerages like L.A.-based Wedbush Securities.
Companies may also have some leeway in deciding at what part of the earnings season they should release their results.
The first and most important factor is when companies’ fiscal calendars end, as some work on a calendar quarter (a period of three consecutive months beginning on January 1) but others, such as tech bellwether Cisco Systems (CSCO), do not.
The Securities and Exchange Commission requires companies release their form 10-Q, a comprehensive quarterly report, 35 days after each of the first three fiscal quarters. After the fourth quarter, they must file an annual 10-K report.
Secondly, companies vary in how much time it takes for them to physically close their books and go through a lengthy review process that includes executives and auditors. Once that window is established, companies may have some freedom to time their release for maximum (or minimum) impact.
Alcoa “may take a fair amount of pride in it,” said Bragg. However, he said, “Unless you persistently have insanely good numbers, it just doesn’t make any sense” to be the first one out of the gate.
Going first would allow her company to “establish what the themes are going to be about in the sector.” Posting results after rivals would allow the company to “incorporate into my conversation things that refute things my biggest competitor says.”
Companies also coordinate with rivals so they don’t release results at the same time as competitors, confusing analysts and portfolio managers who follow the same companies. As head of Pepsico’s IR division, for instance, Tyson would be in contact with beverage giant Coca-Cola (KO).
Proponents of reporting results in the morning may cite the potential for a stronger reaction in the market to bullish results. However, it’s impossible to prove how a stock would react differently and morning pops often prove to be fleeting.
“I think at the end of the day, markets are rational,” said Tyson. “You may not get the highs and lows, but you may end up in the same place.”