Seasonality and Earnings

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We often hear talk of an "earnings season". Scanning the internet, this is ordinarily defined as the first month of a quarter (January, April, July, October), when the bulk of earnings reports are supposed to come in. We decided to see for ourselves when companies from various industries report earnings.

We examined earnings dates for 4200 companies in the first quarter of 2004. We excluded foreign stocks that reported, as well as bulletin board and pink sheet stocks. Our own count shows that 1442 companies reported in January, 1970 companies in February (!), and 800 reported in March.

Around 2500 companies...about 60%...report between 1/15 and 2/15. The biggest single earnings dates were 1/29 and 1/28, where about 300 companies reported. Those days were followed by 1/22, 2/12, 1/27, 2/11, 2/5, and 2/26. The "hottest" day was Wednesday. Companies tend to avoid reporting on Friday. Monday is not particularly active either.

The "coldest" time was at the beginning and end of the quarter. On some of these dates, less than 10 companies reported.

Dividing the dates up into total market capitalization reporting, 1/22 was the strongest, with Microsoft, Pfizer, and Amgen reporting. That was followed by 1/20 (Citigroup, Johnson and Johnson), 2/19 (WalMart, Total Fina), 1/21 (JP Morgan), 2/12 (Dell) and 2/3 (Cisco).

What are the reporting habits of various industries? Below is a table that divides stocks in various industries according to the times they reported. The figures are in percentages.

Industry	First half of Jan	Second half of Jan	First half of Feb	Second half of Feb	First half of March	Second Half of March
Oil and Gas	3	23	21	33	13	5
Gas and electric utilities	0	39	29	22	11	0
Construction Services	4	28	12	24	16	12
Food processing	6	36	12	30	6	9
All retail	5	14	11	23	29	16
Biotech	0	20	33	28	10	8
Medical Devices	1	32	32	19	9	7
Healthcare	0	8	28	46	15	1
Semiconductors	14	57	13	10	1	5
Software	0	47	15	22	9	7
Broadcasting/Communication	2	11	28	32	23	4
Regional Banks	24	70	3	2	2	0
Real Estate	3	18	41	29	8	1

Of particular interest:

Retails tend to report later in the quarter than most other groups.
Nearly half of our healthcare stocks report in the second half of February.
More than half of all semiconductors report in the second half of January.
Nearly half of all software stocks report in the second half of January.
70% of regional banks report in the second half of January
40% of REIT's report in the first half of February.

One could assume that these patterns hold up across the other three quarters. That assumption is not entirely true for various reasons (the first that comes to mind is the fact that 10K reports...the end of the year report...are often issued more than three months after the third quarter report), but it seems reasonable to extend the Jan/Feb/Mar patterns to the other three quarters.

One must be careful in relating these seasonal earnings release patterns to the seasonality of industries and markets. Do industries in general rise before or after positive/negative earnings reports? Are these habits different for some industries than others? Are companies that report early particularly powerful in influencing their industry? Given the concentration of earnings reports at particular times, does the general market behave differently during the concentrated and "non-concentrated" periods?

It would be easy to draw false conclusions. At the risk of doing exactly that, we do note that historically, volatility tends to peak at the end of January, April, July, and October...the heart of the "earnings season".