How Do Quarterly Earnings Reports Affect Stock Prices?

Its earnings season once again and the market has been moving quite volatile lately as investors react to first quarter earnings announcement by listed companies.

Quarterly earnings reports are important financial updates that provide a market glimpse on how stocks will likely be valued in the future. Stock prices tend to rise when earnings results exceed market expectations while disappointing earnings results tend to lower share prices.

Stock prices move based on market expectations. A 20-percent increase in quarterly income may not be seen as positive if market expectation is 40 percent. In the same way, a 10 percent decrease in earnings may cause a stock to go up if the expectation is a much larger decline.


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