Listen to Quarterly Earnings Conference Calls

It is quarterly earnings report season and most publicly held companies are conducting conference calls to discuss their results. The conference calls are publicized ahead of time on the company’s website and can be dialed into, or the webcast can be viewed via the Internet. The replay is usually available for several days or a month after the live broadcast. I implore you to tune into the calls by the companies in which you own a material stock position. If you follow the advice in my book, Full of Bull, you only hold around a half-dozen stocks, so you can certainly handle maybe three or four conference calls.

These conference calls are as close to getting an inside look as you’ll ever have, a fabulous one-hour investment of time. The management discussions and Q&A sessions with Street analysts are executive-direct – no middleman interpretation or spin. They are timely and usually rather detailed. They also are far less tedious than reading boring, unoriginal and after-the-fact research reports and filings. One conference call is worth a thousand research reports. Don’t get too distracted by specifics, numbers and minutiae. Listen to the overall tone and management confidence level. Are the executives humble, focused, objective, forthright and credible? Or are they “Full of Bull” – get it? During the Q&A, notice the Wall Street analysts’ tenor. Are their questions negatively couched, brutal, skeptical or scathing? Or are they neutral, positive, upbeat and supportive?

Sometimes executives dodge culpability when disclosing negative results that are disappointing to investors. They might blame outside causes beyond management’s control — the economy, foreign currency, government, irrational competitor pricing, consumer spending, interest rates, etc. Bad earnings news may even be attributed to non-operational factors such as inferior forecasting, reporting systems or accounting. The culprit now in vogue for any and all shortfalls is the subprime mortgage loan-credit crunch. Even The Hershey Company trotted it out as an excuse awhile back. This kind of approach is damaging to credibility and raises investor doubt.

I want to see CEOs who take responsibility and show leadership. Quality leaders recognize the buck stops with them, and they emphasize their actions to address the situation rather than deflect blame.

Don’t feel it’s urgent to be on the live call, the replay is fine. I always note the earnings highlights and stock price effect on the reporting day, and then to the replay in my car when I have an hour drive. Hearing management discuss the business is the best way to stay abreast and form an intelligent opinion on the future prospects for the company.

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