Wrap Your Mind Around Corporate Earnings Reports

Earning SeasonEarning season comes four times a year, and lasts for roughly a month. It’s when most public companies—including most of the S&P 500announce their quarterly or annual profits.

It’s like a report card. This week alone 180 companies are reporting.

Before a company reports, stock analysts predict what earnings will be. The extent to which a company meets, beats or misses those estimates can move the stock’s price significantly. (Last week Apple (AAPL) blew past estimates and the stock hit an all-time high. Shares are now trading around $400 per share. )

Collectively, we get a snapshot of the health of various sectors and corporate America as a whole. So far, 168 companies have beat estimates, 39 have missed and 20 have met estimates. Those are good results, says Christine Short of Standard & Poor’s.

Should you care? Yes and no. As a long-term investor, getting caught up in short-term results will make you nuts. And buying a stock after dramatic earnings results means you’re buying yesterday’s news. What matters is the outlook going forward.

But if you’re a company shareholder, this quarterly report card can help you gauge how your investment is doing. It won’t be beach reading, but it’s important to know what’s going on in the shop.

Join the crowd: How is this earning season affecting you and your investments?

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