The first quarter earnings season begins today. With the stock market struggling lately, there seem to be a lot of bulls hanging their hopes on earnings strength to help pull the market out of correction territory.
From a seasonal perspective, stocks don’t typically react all that great to their first quarter earnings reports. Using our Earnings Screener tool, we can see how stocks typically react to earnings reports by quarter. Historically, the average stock has gained 0.07% on its earnings reaction day during the first quarter earnings season. That’s the second worst quarter behind only the second quarter reporting period. The best earnings season for stock prices is Q4, when the average stock gains 0.31% on its earnings reaction day. This held true last season when the average stock gained 0.45%.
(For a stock that reports in the morning before the open, its earnings reaction day is that trading day. For a stock that reports after the close, its earnings reaction day is the next trading day.)
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Over the last five years, the average stock that has reported earnings has gained or lost 5.43% on its earnings reaction day. That’s a huge move for investors to deal with once every three months.
Below we have broken out the average daily move for stocks reporting earnings by sector. As expected, Utilities stocks experience the least amount of volatility in reaction to their earnings reports. Notably, though, Financial stocks are the third least volatile in reaction to earnings with an average one-day move of +/-2.93%. The remaining sectors all experience average moves of roughly +/-5% or more.
At the high end of the list is Technology. As shown, the average Tech stock moves +/-7.07% on its earnings reaction day. Consumer Discretionary stocks are the second most volatile to earnings with an average absolute move of 6.55%. Health Care ranks third at +/-6.2%, followed by Telecom and Industrials.
As we do ahead of each earnings season, below is a list of the most volatile stocks on earnings over the last 5 years (last 20 earnings reports). To make the list, a stock needs to have at least 4 years (16 earnings reports) worth of earnings, and it must be set to report its next quarterly number between now and the end of May.
As shown, YRC Worldwide (YRCW) is the most volatile stock on earnings with an average move of +/-17.48% on its earnings reaction day. Fossil Group (FOSL) ranks second just behind YRCW at +/-17.36%. Three more stocks have averaged moves of more than 16% on their earnings reaction days — Infinera (INFN), Groupon (GRPN), and Weight Watchers (WTW).
Other notables on the list of most volatile stocks on earnings include Yelp (YELP), GNC Holdings (GNC), Twitter (TWTR), and Nutrisystem (NTRI).
Not one S&P 500 stock made the list of the top 40 most volatile stocks on earnings, so below we show the 40 most volatile S&P 500 stocks on earnings.
Advanced Micro Devices (AMD) ranks first with an average move of +/-12.02% on its earnings reaction days over the last 5 years. Netflix (NFLX) ranks second with an average move of +/-11.21%. AMD and NFLX are the only two S&P 500 stocks that typically experience moves of 10% or more on earnings.
Expedia (EXPE), Michael Kors (KORS), and Akamai (AKAM) round out the top five. Other notables on the list include NVIDIA (NVDA), Chipotle (CMG), Best Buy (BBY), Amazon.com (AMZN), Electronic Arts (EA), and eBay (EBAY).