What is an Earnings Announcement?
An earnings announcement is a public statement of a company's profits, usually on a quarterly basis.
How Does an Earnings Announcement Work?
For example, let's say Company XYZ is a public company. As such, it must file a 10-Q every quarter with the Securities and Exchange Commission (SEC). At that time, Company XYZ will also issue a press release announcing significant components of its financial performance (including earnings and EPS) and any other noteworthy items.
Why Does an Earnings Announcement Matter?
Earnings announcements kick off the earnings season, and they are often the first pieces of definitive information that investors and analysts get regarding a company's financial performance for the quarter or year. If the information in the announcement meets or exceeds the expectations analysts had of the company's performance, the share price usually goes up after the announcement.
One study also found that on average, stock prices rise around scheduled earnings announcement dates. This is one reason analysts and investors pay special attention to earnings announcements and even plan trades around them.