The Finance Professor: Beginner's Guide to Earnings Calls

We are currently in the belly of the beast of earnings season. The earnings call is the quarterly judgment day for all publicly owned companies . Except for the occasional analyst meeting or press release regarding monthly sales, the earnings call is the only opportunity to get a peek into a company's performance and future expectations.

Personally, I have covered nearly 600 earnings calls for TheStreet.com's Street Insight. At Seton Hall University, 10% of each student's grade in my undergraduate class is derived from his or her analysis of an earnings call. This is such an important element of the investment process that I thought that I would share some of my knowledge and experience with you in this edition of "The Finance Professor."

Step by Step

There are several phases to covering an earnings call. Here are the primary steps in the process:

• Previewing the call.
• Reading the earnings release.
• Listening to the call.
• Analyzing the call.

Step 1. Preview the Call

This is where you do the preparatory research in advance of the earnings call. Just as study is important to school exam preparation, we need to do some homework before the earnings report is released and the call is conducted. Here is the homework: