Maybe it's the warmer temperatures and sunny skies, the recent YouTube clip of Susan Boyle or the rescue of the Maersk Alabama, but it seems like things are looking up!
Last week was a pretty good week on Wall Street as well, especially for the banks.
all reported first-quarter earnings last week, and each posted better-than-expected gains. This came on the heels of
, which reported significant gains the week before. Banking stocks have rallied 30% since early March.
While the positive news is boosting the spirits of many within the sector, most analysts feel the results that truly matter are those of the government's stress tests, which will not be unveiled until the end of the month. The tests were designed to evaluate how big banks would fare if the economy got even worse. Only time will tell if we're truly out of the woods yet.
With the current focus on company earnings, those new to
and investing in general may be unfamiliar with quarterly reports. What does "quarterly earnings report" mean?
In essence, a quarterly earnings report is much like a student's report card, except it's for publicly traded companies. These reports, usually filed in January, April, July and October, let shareholders know how well the company has performed over the previous three months. Included in these reports are net income, earnings per share, earnings from continuing operations and net sales.
Most often, the key metrics -- net income and earnings per share -- are compared with the previous year's numbers. Analysts and investors then gauge the financial health of the company and whether or not to invest.
One question you might want to pose to your students is whether or not they think a quarterly earnings report will accurately predict the company's future. Many on Wall Street are questioning just that as banks remain plagued by fundamental uncertainties, such as toxic assets they have been unable or unwilling to shed as well as the repayment of TARP money.
To further your discussion of quarterly earnings, be sure to check out the "Dividends and Earnings" lesson as well as the "What Causes Stock Prices to Change" lesson located in the
. The Innings and Earnings edition of the
In the News
newsletter will also be beneficial to your students.
The two lessons are accessible by logging in and clicking on "Lesson Sequence" and then selecting "Display a Complete Outline of All Lessons." To access the newsletter, click "Publications," select "Show All Publications by Name," and then select "In the News."
This article was written by a staff member of The Stock Market Game.