MIT Sloan Asst. Prof. Eric So
If you have good news, you want to rush to tell people about it. If you have bad news, you tend to stall, hoping it will go away or that some good news will come along to dilute it. Companies, it turns out, behave similarly — and therein lies an extraordinary opportunity that most investors have been missing.
I recently studied whether the announcements companies make when they reschedule earnings reports contain important information about the firms. This earnings season, for instance, investors may notice that Apple Inc.AAPL, -0.53% moved forward its expected earnings announcement date to Oct. 20 from Oct. 28. Meanwhile, Coca-Cola Co. KO, -0.64% has delayed its expected reporting date to Oct. 21 from Oct. 14.
What can investors predict from such behavior? Often, quite a lot.
When companies shift a scheduled reporting date, the announcement typically appears routine. Some financial reporting dates are set by regulation, but firms have discretion in scheduling earnings reports.
In this study, I analyzed the corporate reporting calendars of some 19,000 companies from 2006 through 2013. Wall Street Horizon, Inc., a firm that collects events information of publicly traded companies, provided the data.
I discovered that firms which moved up their reporting dates were considerably more likely to report higher earnings, while those that delayed their reporting dates tended to announce earnings declines. The stock values of the companies tracked closely with the earnings trends.