Quarterly earnings being scrapped
SEC proposal to eliminate the quarterly reporting requirement. I’m curious what happens to the industry if a good chunk of companies don’t file quarterly? Does it become more of a casino? Analysts were over supplied heading into the removal of recurring significant liquidity events… what are the value of professional investors in this world without quarterly eps?
Based on the most helpful WSO content, the elimination of quarterly earnings reporting could significantly reshape the financial landscape. Here’s how it might impact the industry:
Increased Uncertainty and Volatility: Without quarterly earnings, the market could become more speculative. Investors would have less frequent data to assess company performance, potentially leading to greater reliance on rumors, sentiment, and macroeconomic indicators. This could make the market feel more like a "casino," as you put it, with less transparency and more guesswork.
Shift in Analyst Roles: Analysts, who are already oversupplied, might need to pivot their focus. Instead of dissecting quarterly earnings, they could concentrate on long-term trends, industry dynamics, and qualitative factors like management strategy. This could elevate the importance of deep, fundamental research over short-term earnings analysis.
Impact on Professional Investors: Professional investors might see their value increase in a world without quarterly EPS. With less frequent data, their ability to conduct in-depth research, build proprietary models, and maintain direct communication with management teams could become a critical edge. This could separate skilled investors from the broader market participants who rely on frequent updates.
Liquidity and Market Dynamics: Quarterly earnings often act as liquidity events, drawing attention and trading activity. Without them, liquidity could become more concentrated around other events, such as annual reports or major announcements. This might lead to less frequent but more pronounced market movements.
Long-Term Focus: On the positive side, eliminating quarterly reporting could encourage companies and investors to focus on long-term performance rather than short-term results. This could reduce the pressure on management to meet quarterly expectations, potentially leading to better strategic decisions.
While the proposal to eliminate quarterly reporting has its pros and cons, it would undoubtedly require the industry to adapt significantly, with professional investors and analysts playing a more critical role in navigating the new landscape.
Sources: Rosy Earnings, Mid-Week Reversal | The Daily Peel | 8/4/22, "F*ck Your Puts" No Longer Valid | The Daily Peel | 4/7/22, Uphill Battle | The Daily Peel | 6/29/22, Are Hedge Fund Employees Structurally F***ed, Trump in trouble
The value of the analyst is greater…markets with non-linearity in price discovery/information dissemination make your job worth a lot more.
I think the structure by which money flows through the pipes will have to change for analysts to be more valuable with less fundamental data points that can be validated by the market over short time horizons. I tend to actually be willing to take pain based on a fundamental view but many don’t want to wear short term pain which creates alpha in some cases. Beta can be automated to some degree
Really doesn't change too much. Most companies will still have quarterly results and will probably trade with an index premia. EU/UK already do this and our UK analysts don't operate very differently.
Won't change much. It just makes quarterly reporting optional (vs. mandatory). Most firms will stay the course, some of the smaller firms with less resources may move to semiannual reporting. No biggie really
I feel like with the liquidity dynamics in the US market becomes more of a casino with less fundamentals and less analysts required to look at those numbers
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