- Downtown Josh Brown
- How the Media Covers Earnings Season
How the Media Covers Earnings Season
Dan Ives and Alex Kantrowitz join us for a brand new thing
The mainstream media is very good at getting earnings news to investors and traders. The numbers hit the tape and within a second the anchor is reading those numbers while the stock price reaction is flashed on screen.
The financial media websites have the articles pre-populated and just stick the actual numbers in and hit publish. This is critical for SEO and social media. First! The site tweets a link to its own article. If you’re not first, you’re last. Speed is of the essence for a certain portion of the audience. There’s some professional pride wrapped up in that too.
But what if the headline says the reaction to earnings is negative but then the stock turns around and trades higher? So what. Get the story out, we can always change the headline later. Nobody cares.
It sounds crazy but it’s true. In markets, sentiment and price can change on a dime. Put the news out and let the consumer decide whether or not the opening trades are correctly interpreting the situation. If not, in your opinion, then perhaps there’s a trade to be made. Fade the rally, buy the sell-off, choose your own adventure.
Back on television, there are guests on-set flanking the anchor (or, in a pinch, standing by remotely) who have a working knowledge of the company and what the expectations were going into the print. They are ready to provide instant reaction. There’s another reporter scouring the official press release, camera-ready, waiting to pop on the air with additional color.
If it’s a morning release, there’s sometimes a pre-arranged sitdown with the CEO to provide more context around the results. This only gets scheduled if the report is either really good or really bad or if it coincides with some major product launch or anti-activist effort. If it’s an afternoon release, the conference call will have to suffice, there is almost never a sitdown scheduled. Every once in a while Cramer gets a good one on Mad Money at 6pm but, in general, very few executives want to be on TV at night. The Californians (mainly tech company CEOs) like it better this way. They’re not the type of people to run in front of a news camera if it’s not going to be highly scripted and stage-managed like their own product announcements.
Anyway, if the number hits at 4 o’clock or 4:15 and the conference call begins at 5, by 5:30pm ET the narrative is already set. The press has their take and their take will usually be an amalgam of the tweets they see from investors and a few snippets they’ve pulled from the company’s release. They might wait to see if anyone asks or says anything interesting on the call or they might just hit publish and get the F Train local back to Brooklyn. There’ll be recaps to write the next morning incorporating The Street’s upgrades and downgrades.
Speaking of upgrades and downgrades…over on Wall Street (which is really on Park Avenue in the 40’s) analysts will work late into the night updating their models, price targets, assumptions, commentary and outlook. That stuff has to be on the Bloomberg Terminal by sunrise in New York. The whole purpose of it is to attract institutional order flow to the desk. Sell-side research isn’t being paid for and published as a societal good. It’s a business. In this business, it’s an early man’s game. By 10am, you’ve already seen all the trading activity that matters for the day, other than the 3:30 to 4pm window.
The stock price reaction within the first 24 hours after a company has reported is usually the end of the story as far as media coverage is concerned. There are more companies reporting and another day’s worth of stories to broadcast. Novelty and newness are the priority in financial media. It’s hard to impulse “the eyeballs” to click on something that isn’t urgent and immediate. Urgent and immediate is what pays the bills. “Actionable” is a big buzz word. News is also a business, after all.
The hustle and bustle around earnings reports I’ve described is exciting and fun to be a part of, as I frequently am. It’s the closest thing we have in financial media to “the playoffs.” In financial news, we don’t have great visuals like they do in sports journalism or celebrity gossip. ESPN and TMZ have astonishing highlights, bloopers, soundbites from after the game, fan reaction shots from the stands, red carpet walks, film clips and beautiful, famous women in bathing suits on vacation. They don’t even really have to say words over these videos, you’re going to click it either way. In finance, we don’t have slam dunks, home runs, Real Housewife dust-ups or models in bikinis. We have charts. That’s the visual. Price go up, price go down. Change the colors and fonts, animate the graphics, move the camera around, okay, but a chart is a chart. It’s cool but it’s just not as catchy.
However, during earnings season - four times a year - we do have dramatic price moves in compressed time periods. Gaps up, gaps down, thrilling reversals, euphoric rallies, despondent little crashes. These ups and downs do make for compelling visuals. Real-time charts of post-market or pre-market action on a stock gapping up or down big - keep the cursor blinking, show the price moving and shaking, cut back to the anchor, chart in the corner of the screen, scroll some *** ALERT *** headlines below and make sure they’re in red. These moments add a level of urgency akin to “This game is make or break for the Bengals’ season, it’s all on the line for Joe Burrow!” Of course we in the media are going to lean into that drama. How could we not? And it’s not totally manufactured, people are making and losing millions of dollars as we speak.
Do you want to be first or best?
During earnings season the news moves so fast we can easily lose track of what we’ve just heard. Every day brings twenty or thirty more earnings reports until, after about five or six weeks, we’ve heard everything from every company in the S&P 500. But what did we learn? What were the important bits that came and went while the tickers was scrolling and the hits just kept on coming. What is the real takeaway?
Aha! You’ve now arrived at what we believe is the real opportunity. What if you’re a media property and you literally couldn’t care less about being first, only about being best? Don’t tell anyone this, but that’s kind of what we’ve been doing on The Compound since it launched in 2018. We’re only as timely as we need to be when news occurs there’s no race or rush. There’s no reward for it. Nobody is expecting us to break news or get to the scene of the accident before the other cameras. We do news analysis and commentary. And being first is not as important as being best. Having the right response - reasonable, not dramatic. Contextual, not quick. Thoughtful, not instantaneous.
By not catering specifically to day traders or hedge funds who are trying to react quickly, we have the luxury of holding our takes until we’ve seen not only the numbers themselves but the reaction to those number for a day or so. Plus we can pull in all the articles and research published in the aftermath of the report. We can let the temperature drop a bit. We can focus on the meaning of what’s been said for the future, not fixate on the volatility of the present. It’s an investor vs trader mentality and it’s very on-brand for us.
thanks to Compound staffer Daniel Parra for our dope new artwork
“Great Quarter, Guys”
I like the way the financial media covers earnings season. I wouldn’t change it at all. But I also think there’s something very valuable missing. Which is why I am so excited to introduce the newest show on The Compound channel, “Great Quarter, Guys” - premiering today and returning every quarter through the end of this year.
My colleague Michael Batnick is the creator of the show and its primary host. His co-hosts for the pilot episode are me, red hot Wedbush tech analyst Dan Ives and Big Technology podcast host and CNBC Contributor Alex Kantrowitz.
Michael, Dan, Alex and I did ten minutes each on six of the most important stocks to report earnings this week. We go through what really happened, what’s important to remember, the crucial takeaways for investors and the reactions worth discussing.
The show is available on YouTube now, you can watch it below. It will also be up on the The Compound and Friends podcast for listeners tomorrow night.
I hope you love it. We made it just for you.
Okay, that’s all from me for now, talk soon! - Josh