Companies need to rethink how they report earnings

Yahoo Finance Video
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Yahoo Finance Live's Brian Sozzi provides his take on the way companies are reporting their quarterly earnings.

Video Transcript

[MUSIC PLAYING]

BRAD SMITH: Welcome back, everyone. A take so nice, we're doing it twice. A few days ago, Brian Sozzi talked about what he would change in the company's earnings call. He dug a little further on that topic for his take today. Sozz, where do we need to begin?

BRIAN SOZZI: Yeah,

BRAD SMITH: [INAUDIBLE]

BRIAN SOZZI: Yes, I did it this early in this week, inspired by what Adam Aron, the CEO over at AMC told us on-- he's running his earnings calls a lot differently, a lot more retail-focused. He takes questions from retail investors. Says a lot of interesting things directly to them on Twitter.

And I've been getting a lot of feedback from executives and contacts in the industry about some things that I posted to LinkedIn about how earnings calls should change. Now, by and large, I'm getting a lot of, amen, yes, these things need to change. Why do we continue to do things like this?

But I'm also hearing a reluctance by companies to change up how their earnings calls are presented to better just help retail investors understand it. A lot of folks just saying, if it ain't broke, don't fix it. What does that mean? You put out your boring 8K or earnings press release and you hold your boring earnings call where you have an executive speaking for about 60 minutes. And then they toss a few questions to, in many cases, equally boring stock analysts.

Now, here's what I would say, here are a couple of changes I would like to see in addition to earnings calls, but also the press releases that we're getting from companies. I think companies in this environment when there's a lot of information coming at average investors and investors even institutionally, highlight the single most important metric they think investors should know and give me some reasons why.

Next up here, show charts of sequential changes for key financial items. You know, we don't get that type of information by companies right now. A lot of folks have to go back and calculate it themselves. Some charts on earnings releases would be very helpful to establish, you know, how that business is trending, especially at a time when economic growth is slowing, as it has in this country, Brad.

And last but not least, I need to see clearly five reasons why a company X missed or beat on earnings per share. You know, a lot of companies, I think, want to not acknowledge that these estimates by Wall Street analysts exist out there. Well, they do.

And if you beat on earnings, chances are your stock price goes up. If you miss, it's going to get slaughtered. We're seeing that with Sonos today as well. Also, grill maker Traeger. And you don't get a lot of reasons why. It would be very helpful to hear management come out and say, hey, this is why we just didn't live up to our own internal expectations and the Street's, and vise versa.

Last but not least here, here's my take for this follow up segment. Don't just change the earnings call, change the whole darn process. So start changing your earnings calls, executives. Think about changing up your earnings press release. It's not OK to be doing the same thing you have been doing for 25 years.

BRAD SMITH: But the process in terms of changing the whole darn process, as you said, should the cyclicality change? Because that's something that companies have pushed back as well.

BRIAN SOZZI: Do it better. Just make it more retail, investor-friendly. And then by doing so, I think it would help a lot of institutional investors as well, better lay out their models and understand the companies, which is good for retail investors because these whale people will then publish reports that we can all read and understand.

BRAD SMITH: Sozzi's [? earnings ?] [? saying ?] in addendum, I might add.