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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More on AAII.com
- 16 Financial Ratios for Analyzing a Company’s Strengths and Weaknesses – Ratios allow you to determine whether a company is performing as well as or worse than its executives would have you believe.
- What You Can Learn from Shareholder Letters – Commentary from a company’s executives can add valuable color to the numbers if you know what to look for.
Highlights from this month’s AAII Journal
- The Individual Investor’s Guide to the Top Mutual Funds 2017 – The online version of our mutual fund guide has all new features, including reports for each fund.
- Strategies for Unneeded RMDs – Suggestions on what retirees who do not need the money can do with required minimum distributions from retirement.
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.
- Bullish: 32.8%, up 1.2 points
- Neutral: 33%, down 1.9 points
- Bearish: 34.2%, up 0.7 points
- 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.
- 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.
- 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.