Get the most out of earnings call transcripts.
By Jeremy Glaser | 04-09-10 | 06:00 AM | Email Article

[Editors note: earnings call transcripts are no longer available on]

Earnings conference calls are probably the best way for individual investors to get a quick sense of how a quarter went, where the business is going, and even to get a glimpse of management's personality and style.

Jeremy Glaser is the Markets Editor for

Reading through the call is no substitute for carefully looking at the firm's financial statements, but it is a good start. Here is a quick guide of what to expect in a conference call and how to get the most out of it.

Who, What, and When
There is absolutely no requirement to hold a conference call. Many companies, including stalwarts like  Berkshire Hathaway  , forego them altogether. All that listed firms are required to do is file a form 10-Q (or 10-K at the end of the fiscal year) to update investors on the prior three months' performance.

Many companies, however, choose to talk to their investors and analysts after they release their earnings. Firms can also hold conference calls apart from earnings to provide business updates or to comment on upcoming merger or restructuring projects.

On the call, the firm is represented by top members of the management team, sometimes including the CFO and CEO. However, every company has its own set of customs, so don't expect to hear from Steve Jobs after every  Apple  earnings release.

Calls start with a prepared section, which will generally lay out the highlights of the quarter and often covers a lot of the same ground as the earnings press release. Oftentimes management will take an in-depth look at one particular segment that over- or under-performed and provide some additional anecdotal details about the firm's performance. For some companies, earnings guidance for the next few quarters may also be provided.

After the prepared remarks, members of the executive team take questions primarily from members of the analyst community. Many of these questions might seem esoteric, or to center around seemingly minor accounting or timing issues. That's because analysts are tasked with predicting a firm's earnings per share every quarter. Small changes in accounting practices can have reasonably large impacts on one quarter's EPS numbers, even if they don't have an impact on the firm's long-term economic value.

Things to Watch For
In the prepared remarks, it is important to note both what management brings up and what they don't. Are there areas of the business that they are spending an inordinate amount of time discussing? This could indicate areas where management is spending most of their time or where they think most of the future growth of the company is going to come from. On the other hand, parts of the business that are mostly ignored on the call could be a sign of declining interest.

Watch carefully for underperforming segments or restructuring charges that appear in the press releases and financial statements that are glossed over in the call. Management often tries to put the best face on results, even when not all is well. Failure to mention what is going wrong could be a sign that management is in denial or that they are trying to paper over bad news.

In the Q&A portion, the questions are often more interesting than the answers. The questions show what's on the analyst community's mind. What are they concerned about? What do they think the key drivers of the business are? This information can be invaluable as a jumping off point for your own research.

Finally, you can try to use the call to get a sense of management's personality. Are they gruff and curt with answers, or do they go above and beyond to be helpful? Do they seem to have a strong grasp of the nuances of the business, or do they constantly need to ask their staff or say they'll provide the answer at a later date? Of course a rude management team might still be great, and the nicest people in the room may have no idea how to turn a profit, but management's demeanor will give you at least a sense of how the business is run.

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