US earnings season kicks off; how can Aussie investors plan ahead?

Highlights

Earnings season has opened in the US with first earnings reports from major firms beginning to roll in.

Global investors are expected to keep an eye on the numbers to strategise accordingly.

Wall Street is known to have a significant impact on the global equities

As big US banks usher in the latest earnings season, global investors are expected to keep an eye on the numbers to strategise accordingly. The financial results of the lenders would show how they may have shifted lending strategies to maintain growth. Wall Street is known to have a significant impact on global equities. US earnings give a fair enough idea to investors about what’s in store ahead.

The Australian investors, too, would be closely following US earnings to devise strategies for their respective season. Analysts also use a company’s financial results (profit, revenue etc.) and guidance estimates to determine how it performed in the past and how it may perform going ahead. Depending on the earnings, the stock prices move up and down.

Here we discuss a few things which should be considered by the Australian investors while investing during earnings season:

Track analysts’ reports

Investors can easily find several reports by analysts before and after earnings season. These reports are prepared by the experts using the best forecasting models and fundamental analysis.

While reports before earnings give an idea of how a particular company would fare, follow-up reports suggest how the company’s stock could perform going ahead. Investors can make use of these forecasts to determine how a company’s stock would roughly perform before and after earnings’ release.

Keep an eye on reports by different brokerages

Seasoned investors don’t depend on any one or two reports for drafting their stock investing strategies. All investors should know that estimates vary from one brokerage to other. Brokerages provide an option to investors to subscribe to their regular reports.

The other thing is that investors should not judge a company’s performance based on a single quarter. They should instead focus on its averages sales and earnings per share (EPS) growth over the quarters.

A stock may see volatility after releasing its quarterly earnings. However, it may be a short-term impact. The stock may regain its value soon afterwards. Any decision based on the short-term impact may be detrimental to investors’ interest.

Look beyond market estimates

Investors should not hurry to sell the stock right away if a company misses expectations. Instead, experts advise to closely decipher why that particular company missed the target. It is advisable to always look beyond analysts’ consensus numbers and not go for knee-jerk reaction.

Bottom Line

The US earnings season can give the Australian investors a good idea about how things are shaping up in the global economy. However, investors should always avoid knee-jerk reactions.

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