An earnings announcement is an official public statement of a company's profitability for a specific period, typically a quarter or a year. An earnings announcement occurs on a specific date during earnings season and is preceded by earnings estimates issued by equity analysts. If a company has been profitable leading up to the announcement, its share price will usually increase up to and slightly after the information is released. Because earnings announcements can have such a prominent effect on the market, they are often considered when predicting the next day's open.
The data in the announcements must be accurate, according to Securities and Exchange Commission regulations. Because the earnings announcement is the official statement of a company's profitability, the days leading up to the announcement are often filled with speculation among investors.
Analyst estimates can be notoriously off-the-mark and can rapidly adjust up or down in the days leading up to the announcement, artificially inflating the share price and affecting speculative trading.
For analysts valuing a firm's future earnings per share (EPS), estimates are arguably the most important input. Analysts use forecasting models, management guidance, and other fundamental information on a company to derive an EPS estimate.
Source: Investopedia, Earnings Announcement: Definition and Impact on Market, accessed 26 December 2023, <https://www.investopedia.com/terms/e/earnings-announcement.asp>