Who wins and who loses from fewer corporate earnings reports
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President Trump suggested on Monday that U.S. public companies should not be required to report earnings quarterly, but on a six-month schedule instead, subject to Securities and Exchange Commission approval.
Why it matters: The potential shift could have huge implications for Wall Street, financial markets, traders and companies.
State of play: It's unclear what prompted the president's call. Trump did pursue a similar change in 2018 — but proposed it too late to gain traction.
- This time, he has plenty of runway to see it through.
What they're saying: In his post about the proposal, Trump cited a statement that "China has a 50 to 100 year view on management of a company, whereas we run our companies on a quarterly basis? ? ? Not good! !!"
- "If this move from the administration is about emulating China—I didn't really realize that was the direction we were really wanting to take American capitalism," says Steve Sosnick, chief strategist at Interactive Brokers.
- The push comes as administration officials are set to meet with Beijing to discuss trade talks.
Catch up quick: The case for less frequent quarterly reports is not without its fans.
- Jamie Dimon and Warren Buffett co-wrote an op-ed about short-term earnings "harming the economy" in 2018.
- It's also not without precedent: The United Kingdom switched back to semi-annual earnings after briefly pivoting to the quarterly model.
The winners: The potential beneficiaries of the shift are those who don't want the expense or hassle of quarterly earnings.
- CEOs who would prefer not to deal with sell-side analysts and investors four times a year.
- Small-cap companies with fewer resources may breathe a "sigh of relief," by offering reports half as much, Sosnick said.
- Public markets, according to Dimon and Buffett, who argued that the pressure of quarterly earnings discourages firms from going public sooner.
- "It may help companies operate better," says Sean O'Hara, president at Pacer ETFs, because these firms can focus on long-term goals versus short-term earnings growth.
- Volatility: Fewer earnings means less clarity going into reports, which could boost volatility, Sosnick says.
The losers: The potential downsides could disproportionately impact market participants.
- Options traders who bet on earnings results (though O'Hara says it "may not be a bad thing" to make it harder for the meme stock crowd to trade.)
- Analysts, who rely on quarterly prints to suss out price targets and ratings on the stocks they cover.
- Market participants who like the clarity and transparency that should come with more frequent reports.
Zoom out: This policy rhymes with the administrations broader deregulation push.
- SEC requirements for quarterly reports are extensive, and this change would allow corporates to save time and money by dealing with those reporting structures less frequently.
Yes, but: Investors "have come to expect quarterly reporting and will exert pressure on companies to continue to provide quarterly reporting," Erik Gerding, former director of corporate finance at the SEC, wrote to Axios.
What we're watching: Why this is happening now, and what that signals about the administration's goals for financial markets.
