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Education - June 28, 2019

The Earnings Season Playbook

Earnings season rolls around four times a year and brings with it a frenzy of information. The beats and misses, EPS and revenue, excitement and uncertainty all combine for a dizzying few weeks.

Don’t get us wrong, it’s important information. Whether it’s a huge swing or a minor movement, earnings announcements make more information available to the public and cause stock prices to change. As such, earnings season requires more market monitoring, due diligence, and attention to detail than most other times of the year.

So much information to take in, so little time to react.

While some investors like to “trade earnings” — buy and sell stocks on speculation of beats and misses — ahead of announcements, and others prefer a more passive approach of treating earnings as a quarterly pulse check, every investor needs to locate, make sense of, and harness all the new information that’s released in earnings announcements.

The three areas of the Earnings Season Playbook focus on:

  1. Monitoring the markets closely & identifying key holdings
  2. Finding trends in beats, misses, and price action
  3. Considering sector and macroeconomic trends

This guide will empower you to best position your portfolio for success. In just three easy steps, you can navigate earnings season, find better investment opportunities, and keep your portfolio healthy quarter after quarter.

1. Watch the markets closely & identify key holdings

To effectively monitor the markets before, during, and after earnings season, set up your YCharts Dashboard with all of the tickers, data, and charts you need. Create Watchlists with all of your portfolio holdings and customize the “Data” tab to include metrics to which you want quick access around earnings announcements.

Make your Dashboard and all of the data it shows even more powerful with Alerts. Set Alerts for any company you follow and you’ll receive a notification or email when something you identify as important happens.

Shown below: an Alert being set for United Technologies’ (UTX) earnings announcements and financial statements, and also an Alert for whenever UTX’s price drops by 5% or more in a single day. These are examples of Alerts you can set to ensure that you’re always plugged in to the market and can quickly respond to developments, even while away from your desktop.


With your Dashboard and Alerts set up for monitoring, start drilling down on your portfolio holdings. Using the YCharts Model Portfolios tool, see which of your holdings have drifted, and to what degree, from your target allocations.

During earnings season, dig deeper on any concentrated positions you own since an earnings miss or beat could make a big impact on your portfolio. For the example portfolio below, we’ve identified Microsoft (MSFT) and Costco Wholesale (COST) as companies to further review, based on holding drift.


2. Look for trends in beats, misses & price action

It is often said that past behavior is the best indicator of future performance. If a company has historically and consistently beaten Wall Street’s earnings estimates, it’s logical to assume they will continue to do so.

Right from your Dashboard, navigate to view your Watchlist in Fundamental Charts:


Add “Quarterly Actual EPS” (shown below in orange) and “Quarterly EPS Estimates” (blue) to the chart and annotate the stock’s price (purple) with “E” flags to indicate each of its recent earnings announcements.


You can easily scroll through your portfolio holdings, examining how each stock’s price has reacted to earnings beats and misses over time. This chart also shows what future EPS numbers Wall Street is expecting for each company.

Now that you have an idea for trends within your portfolio, start looking at the broader market to find buy or sell opportunities ahead of earnings. (As mentioned earlier, trading earnings requires a higher risk appetite, and is not recommended for everyone.)

Using Timeseries Analysis, pull data for large lists of securities within a specific sector, industry, or an index’s constituents. Select Quarterly EPS Surprise, a metric that indicates the degree by which a stock’s Actual EPS beats its EPS Estimates, and look for companies with consistently high EPS Surprise. Timeseries Analysis also allows you to pre-format and easily export this data to use within the powerful YCharts Excel Add-in.


3. Consider sector and macroeconomic trends

In the portfolio shared earlier, Costco is a holding that has drifted above its target weight and may warrant extra due diligence. From the Costco Quote Page, click on the Performance tab to see how COST stacks up against its peer group, sector, industry, and the market as a whole.

As shown below, the Performance tab covers metrics like total returns versus comparable companies, key performance ratios, and provides averages for each of Costco, the consumer defensive sector, and the discount stores industry. Every company’s Performance tab contains a lot of data that can be especially valuable during earnings season.


To gain a broader view of your holdings, incorporate relevant macroeconomic data to see if the stock’s industry (or the entire economy) is facing tailwinds or headwinds.

Continuing with our evaluation of Costco, a consumer defensive stock in the discount stores industry, layer into your analysis macro indicators like US Change in Retail Sales and US Change in PCE Price Index, which measures the change in prices paid for goods and services. In the chart below, Costco’s price, with earnings dates marked by “E” flags, moves in conjunction with this macroeconomic data.

Earnings season is all about information. As public companies report figures, hold earnings calls, and issue guidance, they release information into the market. Being successful comes down to what you, as an investor, do with that information.

This guide shows that, with a powerful and easy-to-use tool like YCharts, you can: stay on top of news and developments concerning your key holdings; identify and take advantage of trends in earnings beats and misses; and incorporate sector and economic data into your evaluations.

Connect With YCharts

To get in touch, contact YCharts via email at hello@ycharts.com or by phone at (866) 965-7552

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