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How I Analyze Earnings Releases

We are currently in the heart of fourth-quarter earnings season. The release of results is clustered in the mornings and afternoons, particularly between Tuesdays and Thursdays. Depending on what’s in your portfolio, it can be tough to keep up with all of the news. For instance, I had a two-day span last week when four companies I either personally follow or track for our Dividend Investing portfolio reported.

Fortunately, from years of analyzing earnings releases I’ve learned techniques to streamline the process. It’s not a completely formulaic process since every company has different divisions and statistics. Some even release different documents. I’ve seen companies issue press releases, spreadsheets and even PowerPoint slides.

Hone in on Revenue, Earnings per Share and Net Income—The very first thing to do is to determine the rate at which revenues, earnings per share (EPS) and net income have changed. Have they grown or decreased compared to the same period a year ago? How do the growth rates for each line item compare to the other two? If profits grew faster than sales, the company’s margins widened. If sales grew faster, margins shrank. If EPS grew faster than net income, then EPS was boosted by a reduction in the share count. Depending on how the earnings release is formatted, it can be easier to simply calculate the growth rates yourself. Continue Reading »


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Highlights from this month’s AAII Journal


The Week Ahead

Fourth-quarter earnings season moves forward with 87 members of the S&P 500 scheduled to report. Included in this group are Dow Jones industrial components Walt Disney Co. (DIS) on Tuesday and Coca-Cola (KO) on Thursday.

The week’s first economic reports will be December international trade and the Labor Department’s December job openings and labor turnover survey (JOLTS), which will be released on Tuesday. Friday will feature January import and export prices, the preliminary University of Michigan February consumer sentiment survey and the January Treasury budget.

Four Federal Reserve officials will make public appearances: Philadelphia president Patrick Harker on Monday; St. Louis president James Bullard and Chicago president Charles Evans on Thursday; and vice chairman Stanley Fischer on Friday.

The Treasury Department will auction $24 billion of three-year notes on Tuesday, $23 billion of 10-year notes on Wednesday and $15 billion of 30-year bonds on Thursday.


AAII Sentiment Survey

Pessimism is above 30% for the third consecutive week; this is the first time this has happened since the election. More about this week’s results.

This week’s Sentiment Survey results:
  • Bullish: 32.8%, up 1.2 points
  • Neutral: 33%, down 1.9 points
  • Bearish: 34.2%, up 0.7 points
Historical averages:
  • Bullish: 38.5%
  • Neutral: 31.0%
  • Bearish: 30.5%

Take the Sentiment Survey.


AAII Asset Allocation Survey

Equity allocations remained largely unchanged, even though fixed-income allocations rose. More about the latest results.

January AAII Asset Allocation Survey results:
  • Stocks and stock funds: 66.0%, down 0.3 percentage points
  • Bonds and bond funds: 16.4%, up 0.6 percentage points
  • Cash: 17.7%, down 0.2% percentage points

Note: Figures may not add to 100% due to rounding.

January AAII Asset Allocation Details:
  • Stocks: 31.2%, up 1.2 percentage points
  • Stock funds: 34.8%, down 1.6 percentage points
  • Bonds: 3.4%, up 0.6 percentage points
  • Bond funds: 13.0%, unchanged
  • Cash: 17.7%, down 0.2% percentage points

Take the Asset Allocation Survey.


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