In our prior post, we highlighted the sectors that have historically seen stocks beat earnings estimates the most and least often using our Interactive Earnings Report Database. Below we highlight how volatile stocks are on their earnings reaction days by sector. Before proceeding, though, we just want to explain what an “earnings reaction day” is. For a stock that reports earnings pre-market before the open of trading, its earnings reaction day is that trading day. For a stock that reports earnings post-market after the close, its earnings reaction day is the next trading day.
Using earnings reaction day price change data for more than 130,000 individual quarterly earnings reports going back to 2001, the average stock that reports earnings experiences a one-day change of +/-5.3% in response to that report.
Unsurprisingly, Technology stocks are the most volatile in response to earnings with an average earnings reaction day change of +/-7.3%. The second most volatile sector is Consumer Discretionary, whose stocks average a move of +/-6.1% on their earnings reaction days. Health Care stocks rank third at +/-6.0%, followed by Industrials at +/-5.4%.
Six sectors are less volatile than average — Consumer Staples, Telecom, Materials, Energy, Financials and Utilities. As you would expect, Utilities stocks are the least volatile in response to earnings reports with an average one-day change of just +/-2.2%. The Financial sector is the second least volatile with an average earnings reaction day change of +/-3.2%. For actionable earnings-season analysis, start a 14-day free trial to Bespoke’s premium research today!