Earnings, Earnings, Everywhere

Now that we’re swinging back into earnings season, I thought that I’d make a few comments on the subject. Once a quarter, publicly traded companies release a quarterly report. That makes sense, right? The report is usually released first as a hardcopy, with a conference call following, to talk about the results. Both events typically happen after the markets have closed for the day. You can listen to the conference calls and read the report by visiting the company’s investor relations webpage.

When earnings are reported, it’s like a reality check to see if the investors have gotten it right over the last few months. Many analysts try to predict what the EPS, or earning per share, for a particular company will be. By the time earnings are released, the price of the stock tends to be priced at the level that would be appropriate if the average analyst’s estimates were correct. So if the company beat estimates, the stock will tend to go up and if they don’t meet the estimates, it will tend to go down.

All other things being the same, you want a company to have as high an EPS as possible, since that means for each share you own, the company has earned (you) more money. Of course you don’t get the money they earn, but solid earnings will generally make the price of the stock go up, which does mean more money for you.

The company that I’m waiting for earnings from right now is Research in Motion, who reports on Thursday afternoon. I hoping there’s good news to help my September options. Wouldn’t a merger with Palm be nice?