Extracting CI from investor conference calls.

Mark Coker, BestCalls.com founder

At least once per quarter, publicly traded companies hold earnings conference calls with analysts and investors to discuss recent results and future expectations. These calls provide CI professionals a gold mine of timely intelligence that simply can't be found in press releases, 10Ks, 10Qs or annual reports.

Until recently, CI professionals were not allowed widespread access to these calls. Today, nearly all calls are open to the public. This guide provides a simple checklist of ten actionable tips to help CI professionals gain the most benefit from their conference call attendance.


1. Listen, listen, listen.

Conference calls help you gain an in-depth understanding of a company. The more calls you attend, the more skilled you will become at extracting valuable competitive intelligence from the calls. You'll learn the underlying fundamentals of a business, form an opinion of management, learn to identify subtle nuances, and receive tips of pending strategic alliances or new product directions.


2. Did earnings meet or exceed expectations?

If there were any disappointments, does management have a decisive plan to remedy the disappointments? Was the disappointment really that bad? For example, did one big order from last quarter fall into this quarter? If they exceeded expectations, were there any shifts in business conditions that might signal accelerating earnings or revenues in the future?


3. Pay close attention to revenues.

Did revenue growth keep pace with earnings growth? In this stagnant economy, some companies will be tempted to "window-dress" their earnings to meet earnings forecasts, but revenues are difficult to manipulate. Revenue growth is the most important engine of future earnings growth and can help you determine if the company is gaining or losing momentum in the marketplace. Analyze sequential quarterly growth rates over a 24 month horizon to determine if revenue growth is accelerating or slowing and to factor out seasonal influences.


4. Mood of management.

Is management upbeat or downbeat? More importantly, how has mood changed compared to previous calls?


5. Mood of analysts.

Are analysts upbeat or downbeat?  More importantly, how has mood changed compared to previous calls? Do analysts preface their questions with congratulatory remarks, or not? Also pay attention to who makes the comments. Congratulatory remarks from a sell-side analyst carries more weight than remarks from the buy-side. Positive remarks from the sell-side could indicate that an upward earnings revision is imminent.  Comments from buy-side analysts are more suspect, because buy-side analysts already have a position in the stock and therefore have a vested interest in placing a positive "spin" on the results.


6. Listen closely to the analyst Q&A.

This is the most important part of the call. This is where information comes out that you won't find in press release, 10K, 10Q, etc.


7. Is management in command of the facts?

Does the management team have answers at the tip of their tongue for every question, or do they fumble through papers and struggle to provide answers to even simple questions? Do the CEO and CFO pass questions to one another in a seamless manner, or are both unsure of answers?


8. Does management articulate a clear vision of the future, and do the results of the quarter demonstrate that they're executing on that strategy?

Successful management teams can often articulate a clear, simple vision for the future, and they execute every quarter like clockwork.


9. How is the company performing in terms of recruiting and employee retention?

Employees are the growth engine for every company.  If the company is having trouble recruiting or retaining skilled staffers, future growth will be threatened. Where are the employees coming from? If key executives are being recruited away from competitors, and the company isn't losing employees to competitors, it's a sign of increased competitive momentum.


10. Listen for forward guidance.

Thanks to Regulation FD, management is no longer allowed to selectively disclose forward looking earnings guidance. As a result, many companies now present prepared remarks on anticipated sequential growth rates, earnings forecasts, comfort with current analyst estimates, etc.


About the author

Mark Coker is founder of BestCalls.com (www.bestcalls.com), the Internet's leading directory of investor conference calls and events. The company's CallTracker service provides CI professionals advance email alerts of pending conference calls, and provides access information and transcripts. Coker is credited with launching in 1999 what many now call the "open conference call movement," which was a grassroots campaign aimed at opening earnings conference calls to the public. The campaign, which gained widespread media coverage and endorsement, shined a bright light on the problem of selective disclosure and served as a catalyst for the SEC's Regulation FD. The author can be reached at mark@bestcalls.com.

copyright 2003 Society of Competitive Intelligence Professionals

scip.online, issue 31, May 8, 2003