Why earnings reports are about more than the numbers

Rarely do I get the chance to use a Twitter post from none other than President Donald J. Trump as a launching pad to write something for you to (hopefully) read.

And yet, one tweet of his from Friday has been on my mind and so has some of the coverage from the general business media in response. I even had some things to say about it on my Twitter feed.

Trump tweeted that he asked the Securities and Exchange Commission to study whether companies should go to reporting financial results twice per year: on a half-year and full-year basis. I encourage you to read this CNNMoney piece that explains it all in a straight-forward matter.

As many know, companies report their financial results four times per year for every quarter and also discuss those results in conference calls with analysts at institutional investment firms. Hence the common "Great Quarter" joke among many analysts that even has a popular Twitter feed associated with it.

Which got me thinking about my beat here and that of so many other business journalists across the country. Market-specific coverage like ours carries an unspoken mandate to look at their financial results.

One of the most common sets of questions along the same line I get at events and from readers goes something like this: "Why do you cover those investor calls so much? Do you really get anything out of them?"

Trust me, I get it. These calls often wade into all sorts of wonky financial terms that only investors care about. I am not going to wade into which financial reporting schedule is best -- only because I am biased toward quarterly but that is out of nosiness.

But I am here to explain how crucial these calls in particular are to our own and colleagues/competimates' coverage -- and hence your understanding and knowledge of the federal market, its companies and the characters that shape it.

Public companies have to not only report their results but explain the broader market trends behind them. Their financial reports come in the form of a press release, more detailed filings to the SEC and then the earnings conference calls that typically last between 45 minutes and 1 hour, 30 minutes in this market.

Those calls include the CEO, chief financial officer, investor relations leader and sometimes other top management leaders. They state the numbers and broader state of the market, then field questions from analysts that track the company for large institutional investors. Those analysts and us reporters attempt to align the financial results with the broader market trends.

The call in particular is where that alignment work happens beyond just the numbers. In almost every call, at least two questions and sometimes more attempt to get leadership to explain the broader market trend that impacted results and to better understand the overall narratives that shape everything.

Sometimes the calls break news. Before it joined General Dynamics, CSRA announced its first acquisition as a less-than two-year-old public company in a May 2017 earnings call with investors. KBR also used a February 2018 earnings call to announce its third government services acquisition in two years and explain the company’s ongoing evolution.

And more recently in July, Leidos confirmed and explained its subcontractor role to prime Cerner on the large Veterans Affairs electronic health record modernization project.

Then there are the statements CEOs in particular make during the call’s Q&A portion to explain the market. That you have to actively listen for, including this past April-May round of calls where so many CEOs foreshadowed another active spending flush through to the fiscal year’s end on Sept. 30.

And there is the chance to mix pessimism with optimism for the overall market, as Northrop Grumman’s CEO did in July. Lockheed Martin’s CEO did the same in April, but also brought up the prospect of another sequestration round for next year.

My former Washington Business Journal “competimate” and friend James Bach accurately noted the arcane and often cryptic nature of the government market last year in his farewell WBJ piece, which I still have saved as a reference for how to do this job.

The government market is inherently not user-friendly and requires a willingness to cut through the cryptic language and buzzwords. But the consequential nature of this market requires such.

There are no shortcuts to understanding what is going on and telling it to you the readers. There is real value in putting in the time and doing the homework so we can tell the real, original story of this market. After all that is what you want us to do and WT Insiders especially pay us to do.

This should all help explain and illustrate why the powers that be inside and outside our WT walls will have to pry my cold, dead hands off of financial coverage. Both the numbers and the broader story beyond them.

Great Quarter or otherwise.