Novice Investing - Earning Warning Season

Date: Monday 01st 2008f December 2008 04:08:23 PM

Earning Warning Season - 03/13/2006

By: Novice Investing Staff

Earning Warning Season, as the name implies, is the period of time where a lot of companies issue earning warnings. During this period, companies confess to whether they can achieve the bar set during the last earning reports. If they can't, then it is quite certain that they will report reduced profit figure when they report earning.

In other words, when companies announce earning warning, they are pre-announcing their earning report to come. Why would company preannounce earning? The reason is that investors hate uncertainty. To give an idea how the company performs during the last two months will reduce that uncertainty. Ironically, earning warning season will create uncertainty on which companies will pre-announce.

The next question will be: when is this earning warning season period? Generally, earning warning season occurs two to four weeks before a company is set to report earnings. In general, most companies will report their quarterly earning report on January, April, July and October. Therefore, earning warning season will fall before that.

If you look at your calendar, therefore, earning warning season falls ... right about now! The most prominent earning warning came a couple of weeks ago from Intel Corporation (INTC). How about the rest? So far, earning warning has been pretty quiet. That bodes well for the stock market going forward. This implies that corporate America is comfortable with their earning estimate and business is not falling off the cliff. Furthermore, a rush of corporate acquisition signals that companies has finally loosen their purse string and starting to feel better about the prospect of their industry going forward.


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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Intel Corp. (INTC) or any other securities.

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