How to Read a Company Earnings Report
Four times a year, US public companies report results, and their shares can jump or drop 10% overnight. Here are the numbers that matter and why guidance often matters more than the past quarter.
Key takeaways
- US public companies report results every quarter, usually in a press release, a conference call and an SEC filing.
- Investors compare revenue and earnings per share (EPS) with analysts' consensus estimates.
- Guidance about future quarters often moves the stock more than the results.
- Check the adjustments: "adjusted" numbers can leave out real costs.
Where to find the report
Companies publish a press release with headline numbers, usually before the market opens or after it closes. They then hold a conference call where executives discuss results and answer analysts' questions. The detailed financial statements are filed with the SEC on Form 10-Q each quarter and Form 10-K once a year, searchable for free on SEC EDGAR. You can also open any company's financials on our stock pages.
The numbers to check first
| Line | What it tells you |
|---|---|
| Revenue | Total sales. Shows whether the business is growing. |
| EPS (earnings per share) | Net profit divided by shares. The headline profit number. |
| Margins | Gross and operating profit as a percent of revenue. Shows pricing power and cost control. |
| Guidance | The company's forecast for the next quarter or year. |
| Free cash flow | Cash left after running the business and investing. Harder to dress up than profit. |
Beat, miss and consensus
Before each report, analysts publish estimates. Their average is the consensus. If EPS comes in above it, the company "beat"; below, it "missed." Because companies often guide analysts toward numbers they can exceed, a small beat is common and may not move the stock much. A beat on both revenue and EPS, with raised guidance, is what investors usually hope for.
Why guidance often matters more
A stock's price reflects expectations about the future. A great quarter with a weak forecast can send shares lower, and a soft quarter with an upbeat outlook can send them higher. Listen for changes in demand, pricing, costs and hiring plans on the call.
GAAP vs. adjusted numbers
Results follow US accounting rules, known as GAAP. Many companies also report "adjusted" or non-GAAP figures that exclude items such as stock-based pay, restructuring or one-time charges. SEC rules require companies to show how the two connect. If adjusted profit is far above GAAP profit quarter after quarter, ask whether the excluded costs are really one-time.
Reading the stock's reaction
Shares often move sharply in after-hours or pre-market trading, when volume is thin. The first move can reverse once the conference call is over. For the vocabulary on a quote screen, see How to Read a Stock Quote, and use the stock profit calculator to see what a move means for your position.
This article is general education, not personalized financial advice. Read our editorial policy and disclaimer.
