Earnings call transcript analysis
This might be bit of a naive question but I had been struggling with this and hope to find help from experienced professionals.
During earnings season, I had been struggling to keep pace with reading through all the earnings call transcripts. Reading one transcript takes around 30 minutes to 1 hour for me and then I had to read some old transcripts too to make sense of some trends or changes. So one company earnings take around 2-3 hours atleast for me and this is just data gathering. Then I use this data to put out some insights.
Is this process in terms of effort and time consumed common practice in the industry? Equity analysts generally have 15-20 companies under coverage hence this workflow can become really tiresome. Also, increasing coverage would mean going through a decade long of earnings transcripts. Given that earnings transcripts are very important events, spending this amount of time during earnings season (and afterwards for deeper analysis) seems a bit suboptimal.
Wanted to understand if this is the common practice in the industry or are there any tools/platforms that help with getting these analytics.
What sector are you in? For the opening remarks cant you just look at the PR for the numbers and then look at the Q&A for analyst and mgmt answers?
Or does your coverage give specific details in the opening remarks that you need to pay attention to?
Have you tried uploading the script into Chat GPT / Perplexity to see if thats helpful?
My opinion is that if you’re on the sellside, the buyside is looking for you to be the expert, and there is no shortcut to this.
Depending on how you position the franchise, you may only need to review the last 1-2 years of transcripts to launch coverage (not 10 years).
Also once you cover a company, each transcript only has 2-3 main points and those will be easily identifiable, and you can ignore everything else usually.
Agreed. Best signal:noise is probably keying into one theme at a time and searching through all transcripts (I-Day, EPS, conferences) to see how the language/outlook changes over time
Was on the sell-side for ~3 years. At the beginning, yes, it takes longer to comprehend what’s happening in the quarter and may require reading a few Q’s back. Never needed to read more than 4-6 quarters back - there’s just too much that’s changing over that period and no one ever cares what happened in 2013 when it’s 2024.
As to your question about whether it hets easier, when you’re pressed for time and have an hour or two to write a note and get it published, you figure out pretty quick what matters versus what does not. There tends to be commonalities for what is in that bucket across a sector - generally it’s items like sales / the translation to revenue growth, expenses, margins, capital allocation, balance sheet (if important), and any one-off strategic plans. Some names may have less / more weighting for what investors care about in a company, but it’s pretty basic once you have a framework for it and through sheer repetition it becomes significantly quicker to go back through an old transcript when needed. Good analysts will also memorize what occurred for each company each quarter and that will help save time / improve reputation when talking names with clients.
How about non financial trends e.g. R&D, sustainability, legal issues etc.? How do you track these topics?
Also, the weights of topics can change over time. To do that, context around these topics would be necessary. To your statement - "when you’re pressed for time and have an hour or two to write a note and get it published, you figure out pretty quick what matters versus what does not." - can you please provide some more details/example in terms of how would you do it without missing out on any insights.
All good points above. I'd also add, you typically have an idea of the note you are going to write for each company going into that earnings, so it's more pulling out points that support that note or go against it if the company really reverses course. For example, take SBUX, probably standard ideas of what you are looking for at that earnings call, same store sales, revenue, reasons for lack of sales, whats going on in China. Yes, they could start talking about AI or accepting Bitcoin, but that's somewhat far off.
End of the day, this is why they say sellside ER is knowing 5 companies really well, 5 companies okay, and 5 companies to fill out your coverage (as in, yes the JP Morgan probably really knows CSCO, so if thats in your coverage but you work at a smaller shop, your probably going to get better calls on smaller names).
what a dream to have only 15 companies. maybe in the good old days...
May I DM you?
I'm working on the solution for exactly this problem as a side project.
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