Betty Liu explains: earnings season & stock impacts

Betty Liu, Executive Vice Chairman for NYSE Group, explains:

We're in the midst of earnings season. Why are earnings so important?

So, each financial quarter, every publicly traded company reports their earnings performance and they usually create quite a buzz in the community. So, earnings reports are basically profit and revenue at a company. And analysts take a look at that because it's a really good indicator of the health of a business.

If earnings are strong, does that mean the stock will go up?

So not necessarily. What investors like to do is compare what the earnings are to the analysts' expectations. And if there's a big gap between the two, then you could likely see a big movement in the stock price. So, let's say that the analysts' expectations were for two dollars a share, but the earnings came in at a dollar a share, then very likely that stock price will fall.