MarketBeat provides investors with an expansive, and growing, toolbox of research tools. This article focuses on the earnings screener and explains how investors can use this tool to refine and/or provide a shortcut for their research.
The MarketBeat Earnings Screener give investors a one-stop resource to search for any earnings report issued by a public company for any quarter going back before the year 2000. The screener allows users to search for a specific stock by putting in its ticker symbol. For example to find results for Amazon (NASDAQ: AMZN) you would enter the ticker symbol AMZN in the Ticker field.
The screener will provide investors with information such as:
- The consensus earnings per share (EPS) and revenue estimates from the analysts tracked by MarketBeat
- The actual EPS and earnings results
- Any forward guidance offered by the company
- The one-day price reaction to the report
The screener also allows investors to search for past earnings reports by selecting a beginning and ending date. Investors can fine-tune their search even more by including information such as whether a company beat or missed guidance and by how much.
What is an Earnings Report?
Publicly traded companies are required by the Securities & Exchange Commission (SEC) to file documents on a regular basis (typically quarterly). In addition to these documents, virtually all companies choose to deliver a report to investors. The key elements of this report include:
- A review of the company’s financial results for the quarter
- A forecast for performance in the following quarter and/or full year
- An explanation of why the company performed the way it did
- A question and answer session with analysts who cover the stock for brokerage firms
What Should Investors Take Away from an Earnings Report?
The key things that investor want to look at are the company’s top line (revenue) and its bottom line (earnings). Generally speaking investors want to see a pattern of revenue that is increasing from the prior quarter (sequentially) and better still from the prior year (year-over-year). Since earnings growth is the primary driver of stock price growth the growth of earnings, and the pace of that growth are important data points for investors.
With that in mind, one of the best features of the earnings screener is the ability to screen for a beat/miss percentage. Investors can select a range at 10% percent increments from a beat of 10% to a miss of 10%. Investors can also choose to screen for stocks that beat or miss regardless of percentage.
Another key thing that investors pay attention to in a company’s earnings report is its forward guidance. Typically, a company will give analysts a full-year forecast. So for example, if the company is reporting its earnings for its first fiscal quarter it will tell analysts what they expect for revenue and earnings for the full year. These estimates are either raised, lowered, or maintained in subsequent earnings reports.
Why Do Earnings Reports Matter?
Simply put, earnings reports move the market. During “earnings season” analysts and institutional investors rely on the information contained in the earnings report to make projections for the following quarter or year. Analysts form their own estimates independent of a company’s estimates. So when the earnings reports are released, analysts are looking to see not just whether a company beat their own estimates, but whether they beat analysts’ expectations.
Most companies take an under promise and over deliver approach to future earnings. However, many analysts may see this as a way of a company being too conservative with their estimates so as not to disappoint. In these cases, you may hear of a company that met its forecast, but came in short of where analysts expected.
In other cases, a company may try to project much better forward earnings than what analysts feel is warranted. In this case, you may see a situation where a company misses on their estimates but still come in higher than what analysts expected.
While this may seem like an imperfect way to determine the direction of a stock’s price movement, the ability of a company to meet analysts’ expectations is a key driver of stock prices both positively and negatively.
What Are the Benefits of Using the MarketBeat Earnings Screener?
Search for Entire Sectors
Maybe you’re interested in seeing how a particular stock has performed historically relative to its peers. The earnings screener lets you choose a sector and get an at-a-glance look at how their respective earnings reports stacked up against each other.
Identify Historical Price Patterns
One way to use the Earnings Screener is to identify patterns that occur with a stock when it delivers earnings reports. This goes beyond the idea that when a company beats expectations the stock goes up and when they miss expectations the stock goes down. But the screener provides you with a historical snapshot that shows the rate of those changes.
For example, Apple (NASDAQ: AAPL) has a long history of having the stock move sharply higher after it delivers a strong earnings report.
However, there are some stocks that tend to move down after earnings even if they deliver an otherwise good report. Identifying these stocks can be the first step in performing your own research to figure out why the stock is performing the way it is.
Many investors who use the MarketBeat Earnings Screener also use other MarketBeat research tools. For example, an investor may have looked at the list of Stocks to Short on MarketBeat.com. If they identify a candidate, they can use the earnings screener to get a sense of what has happened to the stock in the period around earnings.
Build a Customized Watchlist
The MarketBeat earnings screener allows investors to build watchlists based on specific metrics that are important to their investing strategy. This can help simplify the selection process when it’s time to rebalance a portfolio.
As you might expect, screening tools are frequently used by active traders. That’s because they are looking to take advantage of rapid price movement. However, this is one example of how the earnings screener benefits long-term investors.
What Are the Limitations to the Earnings Screener?
The screener is only as good as the information that investors put into it. Too little information may generate an overwhelming number of results. Conversely, the more specific investors can be the faster and more efficiently they can make use of the data. However, being too specific may lead investors to fall prey to confirmation bias.
Another limitation that investors should be careful to avoid is analysis paralysis. Screeners are a helpful starting point, but investors should have a clear plan for how they plan to use the information they get from the earnings screener as part of a trading or investing strategy.