And how to steer your company between quarterly earnings reports versus biannual.
Prompted by President Donald Trump, the Securities Exchange Commission is expected to soon propose reducing the required number of earnings reports from publicly traded companies from quarterly to semiannually.
SEC Chairman Paul Atkins said that it would be up to companies whether to continue reporting four times a year or to move to just two.
“For the sake of shareholders and public companies, the market can decide what the proper cadence is,” he said on CNBC.
While it’s still unclear if this proposed change will become policy, both communicators and investor relations specialists should start weighing their options now and determining the best path forward.
“There’s reasons to (report earnings) quarterly. There’s reasons to do it less frequently, but the factor that we think that companies should put some weight into is this idea that the earnings package provides a chance for companies to engage with their shareholders,” said Sydney Isaacs, managing director and head of H/Advisors Abernathy’s Houston office. “That is an important one, that helps them to build that credibility and trust with their investor base. And there’s not really a perfect substitute for that.”
Isaacs and her colleague Sheila Ennis, managing director and head of the investor relations practice at H/Advisors Abernathy, dug into the pros and cons of each earnings cadence and what communicators should do now to forge strong relationships with IR teams.
The benefits of a quarterly cadence
Both Ennis and Isaacs lauded the concept of giving companies more choice in earnings reports. But they also noted that earnings reports, calls and press releases allow for a touchpoint with all stakeholders. Employees might listen in, or non-investor customers who want to know what’s ahead or how pricing may change.
“So even if you choose not to host a full earnings package each quarter, I’d encourage companies to think about what other audiences they need to be communicating with that may not have been the primary audience for earnings, but that still may benefit from hearing from the company more often with other communications outside of just earnings,” Isaacs said.
Ennis pointed out that in an age of constant misinformation, less frequent earnings calls could lead to communicators scrambling to stay ahead of misinformation irregularly, rather than with scheduled check-ins when they can expect stakeholder attention, including the media.
“Nature hates a vacuum,” she said. “There will always be speculation about what’s actually happening. And so there’s a chance that this would become even more of a burden to constantly be redirecting the conversation.”
Who should consider quarterly vs. biannual earnings reports
Both directors ran through a list of what kinds of businesses might benefit from each cadence, should the new rules go into effect.
Quarterly reporting:
- Fast-moving sectors with lots of news
- Smaller companies vying for the attention of investors and the media who can benefit from more frequent touchpoints
- Companies with newer, less-known leadership who need to establish trust and authority in the marketplace
Semiannual reporting:
- Established companies with well-known leadership and strategies
- Companies with strong sell-side coverage might not need as much company-owned communications on the buy-side
It’s also important to look at what your competition is doing. If your peers are still reporting quarterly, you might be wise to do the same – and vice versa.
Opportunities for IR/PR collaboration
Ennis explained that traditionally, PR efforts focus more on introducing new information to stakeholders while IR is about setting goals, explaining progress and building a track record.
In a world with fewer earnings calls, she sees an opportunity for PR teams to take some of that scaffolded IR approach into their work, “recognizing that everything they say will be compared to the last thing they said, and so therefore focusing a little bit more on building that track record and being sure that each incremental piece of information relates back to the previous statements or objectives shared,” she said.
She also stressed that earnings calls are only one portion of what investors look at in making their decisions. The total package includes everything from media headlines to employee Glassdoor reviews to reports of higher-than-normal energy usage at a plant.
“So what the company is saying to employees and what it’s saying to customers, and when it’s disclosing with regulators, all of those communications go into the bucket of what an investor is going to pour into the pot and stir and make their decision,” Ennis said. “And so I think you have to look at Investor communications in the context of the whole array of what they’re looking at, which is a lot of stuff that’s not just owned by the IR team. And so that’s the case for the alignment of IR across the whole organization, and not in a silo.”
Allison Carter is editorial director of PR Daily and Ragan.com. Follow her on LinkedIn.
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