Study: Companies should focus on future during earnings calls

More than 85% of portfolio managers consider non-financial information as critical during earnings calls.

NEW YORK: Investors care less about the numbers and more about companies sharing forward-looking statements in earnings calls, according to a new study by Edelman’s financial communications group.

The study, powered by Edelman PR’s research and analytics boutique Edelman Berland, surveyed more than 150 portfolio managers and buy-side analysts in April 2015. Out of the responders, more than 85% view non-financial information as a critical element in deciding whether to buy and sell specific stocks.

A well-articulated, forward-looking strategy helps investors better understand and value a company, said 60% who were surveyed.

In addition, 54% said that if a company can articulate a long-term strategy that meets their investment thesis, investors are willing to look past one or two quarters of misses.

"A lot of earnings calls are just a resuscitation of past financial performance, talking about the quarter, what happened, and what didn’t happen," said Lex Suvanto, MD of Edelman’s New York financial communication group and head of its global offering.

He added that the survey "proves that retrospective financial reporting is simply not adequate and companies are missing an opportunity to talk about the future in more strategic terms."

More than half (59%) of participants said they preferred for companies to disclose anticipated future opportunities and vulnerabilities, such as the pipeline for product releases and new contracts as well as expectations for capital allocation strategy.

Meanwhile, 54% said they wanted a company to discuss management’s vision for the business; and 53% said a company should communicate the depth of management’s talent and bench.

The CEO is the preferred voice for communicating company strategy and future direction (99%), current business conditions (74%), and the competitive environment (82%).

However, investors want the CFO to communicate about financial disclosures (94%) and financial modeling assumptions (86%), according to the study.

The survey also found that companies should focus less on a script during earnings calls and more on the Q&A segment.

"Historically, CFOs walk through numbers in great detail and in many cases they mirror the press release," explained Suvanto. "Investors said they wanted less scripted remarks and more Q&A, marking a radical change for some companies which view Q&As as an afterthought."

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