Crafting the Earnings Story: How to Control the Narrative
23 January 2020
By Vanessa Hartung
When it comes to cultivating investor interest and influencing your shareholder base, earnings is king. It’s arguably your best shot at making a strong impression on the Street and framing expectations for investors. Each quarter offers a new opportunity to communicate your company’s performance and track record, reinforce forward-looking strategies, and address any of the investment community’s concerns. The key is crafting messages that resonate with the Street, while maximizing reach and engagement with diverse audiences. Here are a few ways to position yourself with a successful earnings story.
Lead the earnings conversation
Matt Tractenberg, Investor Relations Partner at Q4 says that it’s key to control the narrative, by answering questions you want investors and analysts to ask, before they even ask them. “I worked with a well-respected CEO, who first answered the question the investor/analyst asked, and then answered the question we wished they would ask. If you want to get your message out, don’t wait for the question to be asked.”
Tapping into industry feedback and context is also important. According to an IR Insights Report from IR Magazine, 88% of IROs said that building strong relationships with investors and analysts is the most critical factor for successful IR. When planning for earnings, Matt Van Tassel, Manager of Global Disclosure Services at Business Wire, advises IROs to “build a roadmap for all of your stakeholders.” Between the close of the quarter and your quarterly report, it’s good practice to inform your earnings messaging with feedback from key analysts and investors.
Monitoring Wall Street research and the priority issues for analysts and investors is critical as well. Take conversations with the Street and questions from relevant past calls for the quarter into consideration. Conduct an online survey (ahead of the call) with participating analysts, to understand which topics they most want covered. Also, look to commonly asked questions tied to sell-side and buy-side analyst models. And watch major media headlines and industry trends, to identify stakeholder interests and the specific topics that will resonate with them.
Another key to leading the conversation is understanding how your earnings data fits into the context of the broader industry. Analyze peer quarterly results, earnings call transcripts, and Q&As. Knowing how your peers position themselves on key issues will also help you differentiate your company’s story.
Frame results and expectations
Consistency, confidence, and authenticity are everything in IR. It’s all about framing the strongest and most reliable impressions with the Street. That not only means the information you provide, but also how you present it — from messaging to the tone of voice. According to Karen Greene, VP of Client Experience at Q4: “Craft your key messages to reflect how you want the investment community to interpret the numbers they will see.”
The first step is building trust and credibility with consistency. Your key messages should be seamlessly woven across every quarterly earnings communication, including the call script, press release, direct stakeholder communications, and even the Q&A. If you’re revisiting previous earnings themes, make sure your current messaging is in agreement with what you’ve said in the past.
It’s also essential to shine a light on your company’s strengths and points of differentiation. Start by anticipating how analysts and media will interpret what they hear on the earnings call. One approach is to work backward from the “dream headlines” you envision for analyst and media reports. And then carefully integrate these messages and their supporting points into all communications.
When it comes to presenting your financial data and conveying the state of your company, being clear, confident, and forward-looking is also critical. Illuminate your company’s strengths within the framework of your quarterly numbers. Create a focused story, with crisp and concise messaging that supports your company’s vision for the future.
This means contextualizing your company’s financial results and its business drivers. Your management needs to impactfully highlight your company’s key strategies, strengths, and points of differentiation. The key is focussing on notable growth drivers with segment details, including business models and end-market exposure. Also incorporate forward-looking color on what’s driving trends, and what that means for headwinds and tailwinds for your business segments. Show that your management is on the pulse of investor sentiment and concerns.
And lastly, your messaging and tone should always be authentic and true to your brand. On average, 20% of all price movement is attributable not to the financials, but to what’s been said in those corporate communications. With the rise of Natural Language Processing (NLP) to analyze corporate communications, the focus on language is becoming more precise. NLP systems look for inconsistencies in language or tone, and what those changes might mean, positively or negatively.
A shift in tone or message not only sends a clear signal to NLP systems, but also to your human audience. Avoid any unintentional shifts, by strategically speaking with one voice and central theme, and conveying consistent messages and data points.
Ultimately, management teams inspire the most trust when they’re sincere and direct, whether simply reporting the numbers or discussing a tough situation. And while not every quarter can be a winner, always be realistic about your statement both retrospectively and looking ahead. After all, it’s the longer-term value appreciation that means the most — not the day-to-day volatility.
Want the full story on best practices for a successful earnings? Download The Ultimate Guide to Earnings: 10 Best Practices.