Earnings Calls

Earnings calls are a waste of time. I know because I used to listen to them. 

After a Tesla earnings call in January 2022, I realized how useless they are. The stock dropped over 10% for reasons we'll never know. A few rattled clients emailed me. My response: “I doubt we're going to care about this quarter within a few months, for better or worse.”

I was confident saying that because I know of one earnings call still referenced today. One. And I learned about it in university. It was when the Enron CEO, Jeff Skilling, called an analyst an asshole in 2001. 

Find me another earnings call that made a difference long-term. 

I’m bringing this up because there’s a push right now to shift quarterly earnings reporting requirements to semi-annual. I think that would be a bad decision. 

I don’t like earnings calls. But quarterly earnings reports are important. They force publicly traded companies to disclose their quarterly audited financial statements. Audited financial statements provide all investors – even boring index investors like me – with vital information. Without audited financial statements companies can get away with a lot. 

Barry Ritholtz suggests that today's technology could provide investors with real time financial information. Replace quarterly reporting with immediate reporting. Real time information won’t be audited, but billions of market participants finding fraudulent inconsistencies in real time may be more effective than auditors finding them quarterly. 

Quarterly earnings calls and quarterly earnings reports are not the same thing. Reports provide investors with vital information and keep companies honest. The more often the reporting the better. Earnings calls are theatre. I'll never listen to another one. You shouldn’t either.