Analyst relations has become more and more challenging as IR pros attempt to cut through the clutter and capture the attention of individuals who don't necessarily have in-depth knowledge of their business or industry, yet whose pronouncements can markedly impact a share price.
Ivette Almeida, MD of Grayling USA, explains members of the IR community have had to become much smarter about how they approach analysts.
"More analysts are covering more vertical markets and industries, as well as more service areas," she explains. "You can't just call up an analyst and say, 'Oh, I want you to take a meeting with this company because of X, Y, and Z.' Their time is limited."Year-end battle
That is especially true in late January, when companies battle for analysts' attention to cover year-end results. Cai von Rumohr, MD and senior research analyst specializing in the aerospace industry for Cowen and Company, says IR pros need to communicate more than just the usual company line when releasing year-end results and other financials.
"The quality of IR people definitely varies," says Rumohr, who covers 17 different companies. "You want intelligence, where the IR person gives you additional insights into a situation. Credibility is huge. I have greater respect for an IR person who warns me about a potential issue if it is negative, as opposed to always saying, 'We're great and we always take our share of market.'"
Paul Levi, SVP of IR for Fortune 500 tech company Science Applications International Corporation, makes sure he presents an overarching story about his company.
"Whatever industry you are in, or however difficult it is to talk about your revenue, margins, earnings, or capital infrastructure, if you can't understand and tell the story yourself, you will never get people to appreciate and buy into it," he says. "It really becomes a transparency issue. Times are tough now, so I can't give the same forwarding guidance and outlook I could 10 years ago, but there is still a story to be told about the company."
Levi says IR pros must also be able to get that story across to different audiences, particularly those investors and analysts who may have limited knowledge about an industry.
"A lot more people today use the term, 'I am a generalist,'" he notes. "In a lot of cases, they know nothing about the industry, how it works, what the acronyms are, what drives revenue and margin, and even what drives positive and negative coverage in the market from a news perspective. You have to be ready to work more closely with those individuals."
That may mean more time and resources, Levi adds, "but I look at the world in 360 degrees. If you close off one angle, you're closing out a set of investors."Different targets
Gene Marbach, group VP, Makovsky & Company, says companies need to look beyond the usual players for analyst coverage, even though most clients will have a wish list of star firms they hope will cover their company.
"Clients get stars in their eyes and say, 'Give me Goldman Sachs, JPMorgan,'" he says. "But I've found some folks who do excellent research and have people who follow them, but are not at the marquee firms. So you want to cast a wide net."
Once an analyst shows interest in a company, Rumohr says the IR person should be able to provide access to senior management. "We understand the CEO's time is valuable, but every once in a while we need access to more than the IR person," he says. "That is very important."
And it is critical for IR pros to brief management when they do secure face time with an analyst, adds Grayling's Almeida.
"Sometimes companies don't know that analysts often have a specific way of going through a presentation," she explains. "The company must do a proper representation, as well as be very clear in the messaging."Effective analyst relations Timing is crucial
Get analyst coverage sooner rather than laterGive real insights
Analysts don't just want to hear the company lineCast a wide net
There are a plethora of smart analysts at firms that are smaller or regional in natureDo your homework
Understand some individual analysts will need more education than othersProvide access to senior management
Analysts - as well as investors - are looking for transparency