Earnings Dates Can Predict Stock Performance But Investors Haven’t Caught On, MIT Expert Says

Stock Market Predictions — Traders stand outside the New York Stock Exchange, March 27, 2009. An MIT researcher says that predicting a company's stock performance may be as simple as noting when it releases earnings, but investors haven't seemed to notice. Reuters/Eric Thayer

Predicting the stock market may be as simple as checking the calendar, but an MIT researcher says investors haven’t noticed yet.

New research shows that the way companies plan their earnings announcements and shift their schedules actually says a lot about how the company is doing, and how the stock will move. Companies who push back their dates are more likely to be doing badly, while those who move up dates are most likely to have gains, which translates into how their stock behaves after the fact, according to Eric So, a researcher at the Massachusetts Institute of Technology.

“I think it’s human nature,” So said in a statement on Monday. “When I have good news, I rush home and tell my wife, whereas if I have bad news, I tend to let it sit.”

For his theory, So analyzed more than eight years worth of data from 19,000 companies, based on reporting calendars from Wall Street Horizon Inc. He noted whether and how they adjusted their earnings dates, and their performance in the weeks afterward.

While the trend seems obvious, So said he doesn’t understand why Wall Street hasn’t seemed to notice.

“Investors don’t seem to react to these disclosures,” he said. “They simply wait for the firm to announce earnings and then react. But if we look carefully at this date-shifting behavior, we can predict the fundamentals ahead of the actual earnings announcement.”

In his paper, “Time Will Tell: Information in the Timing of Scheduled Earnings News,” So wrote that in general, companies who report before their scheduled date outperform those who delay by 260 basis points in the following month.