The Dating Game: Decrypting the Signals in Earnings Report Dates

In this report we explore the possibility of investors using the timing of a company’s earnings release date to identify firms likely to report better than expected or disappointing results. The Securities & Exchange Commission (SEC) requires public entities to file financial statements within a specified time window, though companies have discretion as to when they report within the window. Many companies choose to report on a pre-determined cycle, for example, announcing second calendar-quarter results each year on the second Tuesday of July.

The first part of this report focuses on companies that deviate from a historical reporting pattern. What does an advancement or delay of an earnings report date typically say about a company’s fundamentals, and should investors take notice of this event? The second part of this report examines a related topic – the market’s reaction to companies that postpone a previously scheduled (announced) earnings release date.

Findings include:

• Investors should take note when companies deviate from a historical reporting pattern. “Advancers” (companies that advance their earnings report date by at least 6 days) are likely to report improving year-year on sales, better earnings surprises, and more positive conference call sentiment readings than their industry group peers and “delayers” (companies that delay their earnings report date by at least 6 days).
• Due to their higher quality fundamentals, advancers outperform delayers with results much stronger within smaller capitalization stocks. Advancers outperform delayers by over 7% on an annualized basis (Russell 3000). However, long-short return rises to 8.80% (Russell 2000) and falls to 2.21% (Russell 1000).
• The advance/delay signal can be used to enhance the performance of a multi-factor stock selection strategy. The annualized return to stocks identified as buy candidates and tagged as advancers is 10.77%, compared to 6.29% for buy candidates tagged as delayers, with the difference in return significant at the 5% level.
• Companies that postpone a previously announced earnings release date underperform the broad market by 2.44% in the 3 days surrounding the announcement. These companies are also likely to report deteriorating fundamentals, with earnings per share down by about 16% compared to the same period a year ago.