Beat the Bots This Earnings Season
By Jessica DiNapoli April 7, 2015
Last year, the Associated Press started using robots to write earnings stories, long the meat and potatoes of many business journalists. But the AP’s move doesn’t mean earnings season is off limits for real live journalists.
For one thing, Seeking Alpha recently warned that some of these formulaic automated reports, about 3,000 of which are published each quarter, may not provide a complete or even accurate picture of a company’s earnings. What’s more, the best business journalists have always dug into balance sheets and income statements to find more meaningful stories about where the business is headed, what challenges it is facing, or what its results say about the industry to which it belongs or the economy at large.
At the time of the move, the company said as much itself. AP managing editor Lou Ferrara told Mashable that the robot reports would give journalists more time for earnings stories that provide context and for investigative pieces. “Instead, our journalists will focus on reporting and writing stories about what the numbers mean and what gets said in earnings calls on the day of the release, identifying trends and finding exclusive stories we can publish at the time of the earnings reports,” he said.
With first quarter reports already trickling in, here are few tips for business journalists wanting to make the most of earnings season.
- Rule number one, dial in: Most companies will issue press releases or notices on their websites prior to earnings announcements with information about their conference calls, in which they will discuss quarterly results with analysts and investors. These calls can reveal a wealth of information about the company, industry and the larger economy. Journalists can occasionally ask questions themselves, but if not, you can listen in to the questions posed by analysts who make a living researching and making forecasts about the company and its peers. In a pinch, look for transcripts of the calls online. Some companies will publish transcripts of their calls, as do investing websites like Seeking Alpha and TheStreet.com.
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Pay attention to boasting: In February, Elon Musk made headlines for a big statement about Tesla’s bright future: that its market capitalization would rival Apple’s in 10 years. Musk made the statement on the company’s earnings conference call in response to a question about infrastructure spending, and news organizations pounced. Reporters listening in on the call, held at 7:30 p.m. eastern time, got the scoop. Here’s one story about Musk’s claim in Marketwatch.
- Listen for big economic trends: On the conference call, keep an ear out for hints about larger economic issues affecting the company, like low oil prices or weak consumer demand. This Reuters story on Visa’s results for the quarter ended Dec. 31, for example, focuses on issues like holiday season spending and the U.S. job market. The reporter also delves into how the strengthening dollar affects the credit card company, and how Visa lost its right to process domestic payments in Russia, a result of the country hitting back after sanctions. Similarly, the reporter covering GE’s fourth quarter results for Reuters in January used plummeting oil prices to frame his earnings story.
- Tune into news about partnerships and new products. Executives may mention new ventures during the call. These announcements are always big news because they can boost or batter share prices and rejigger the balance of players in an industry. Mentions of new products may also come during a call, signaling a shift in focus and investment. CNNMoney recently reported that Nickelodeon would offer a stand-alone subscription service for viewers, news that was revealed during a quarterly conference call.
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Macy’s Manhattan, 1 million square feet of floor space. ©Roger
Offer context and comparison: Company executives may not name names when it comes to their competitors, but you need to know who they are and how they fared to really understand the company you are writing about. Did falling consumer demand hurt quarterly sales for all of the companies in an industry, or did one fare better than the rest and if so, why? On Feb. 24, Macy’s announced earnings for its quarter ended Jan. 31. The following day, CNBC published an in-depth story on how Macy’s plans to expand into outlet-style stores, news gleaned from the conference call. The CNBC reporter compared Macy’s plans to those of Nordstrom and T.J. Maxx.
- Consider stock buybacks when looking at earnings per share. Companies repurchase shares all the time. A buyback means the same profits are spread over fewer shares, leading to higher earnings per share. One reason companies do this is to reduce dilution that comes from granting employees stock options. Another reason is to boost stock price. But earnings per share (EPS) is only one measure of a company’s performance. Look at revenue and expenses, too. For example: IBM had been forecasting earnings per share of $20 in 2015. One way Big Blue worked toward this goal was by spending billions buying back its own shares, boosting earnings per share even as revenue remained flat. This column in the New York Times, published the same day the company announced third quarter results, explains how the moves appeased investors, and what happened once the company abandoned the plan. Even if a company isn’t spending as much as IBM has buying back its own stock, it’s worth thinking about why it’s doing so.
Stories on company earnings do not have to be all about profit, revenue and earnings per share. Reporters can pick through the numbers to find big changes in company operations, or discover a hint about real news happening on their beat. These are skills that, at least for now, a robot can’t beat.
This entry was posted on Tuesday, April 7th, 2015 at 12:36 pm. It is filed under Skills and Tradecraft and tagged with earnings reporting, earnings season, robot journalism.
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