Juan Luis Perez UBS

UBS analyzed seven years worth of earnings calls — totaling more than 300 million words — from S&P 500 companies.
That sentiment analysis points to yet another breakout quarter with earnings, the bank predicts, with companies set to beat expectations by 3% or more.
UBS’ “Evidence Lab” has also undertaken large projects like satellite imagery and dismantling cars as it tries to position itself for the next era of Wall Street research.

It’s no secret that an upbeat earnings call likely means good things to come for a company’s stock.

So UBS set out to analyze the conference call from every S&P 500 company in the US and Europe from every quarter for the past seven years to see just how often this is true. The resulting data set of 367 million words from 118,000 calls signals yet another earnings blowout this season, the bank said after analyzing the emotions behind executives’ language in the calls.

“The positive momentum in net sentiment, an 8%+ Q1 earnings surprise and a solid macro backdrop reinforce our US Equity Strategy expectation for a Q2 beat of 3%+ in the US,” a team of analysts led by James Arnold said in a note to clients this week. “Furthermore, the trend also reinforces the optimism seen in terms of corporate spending and increased corporate flow through share buybacks, dividends and M&A.”

Most of a stock’s outperformance comes in the first week after the company’s earnings call, UBS says, with tech stocks responding the most to changes in executive sentiment. Media, on the other hand, is showing the harbingers of a disappointing earnings season.

What’s most important to a stock’s move is the change in sentiment, rather than just the general optimism or pessimism. A stark change in how management discusses a company’s financial situation can signal similar changes in the …read more

Source:: Business Insider


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