Daily Update: May 6, 2024

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Quarterly Earnings Calls are Upbeat for a Reason

Quarterly earnings calls are a grim necessity for public companies. Executive teams huddle beforehand, looking to put the most positive or least negative spin on quarterly results with the understanding that analysts will immediately hone in on the areas of concern. However, sentiment analysis for the first quarter of 2024 reveals an unusual level of positivity from corporate officers, reflecting generally improved global performance. While there was variance by region, sector and company, the upbeat tone of first-quarter earnings calls reflects a continuing recovery and strong earnings. 

Sentiment analysis has become an increasingly popular way for research analysts to see through the fog of words on quarterly earnings calls. S&P Global Market Intelligence’s Transcript Sentiment Scores use natural language processing to look at earnings call transcripts in a quantitative fashion and focus on the metrics of net positivity, numeric transparency, language complexity and analyst selectivity ratio. In simple terms, these metrics demonstrate how happy the executives seem, how straightforward they are about their numbers (measured as the ratio of words to numbers), how clear their language is and how many analysts get to ask questions. A company trying to obfuscate disappointing results might avoid talking about numbers, use lots of jargon and avoid questions from analysts they knew to be critical. 

In the first quarter, S&P Global Market Intelligence’s sentiment analysis yielded the highest ever net positivity score of 1.26%. Officers of publicly traded companies were particularly upbeat. Numeric transparency also increased, with people appearing to be more comfortable talking about numbers, but language complexity crept up. The industrials sector had the lowest level of language complexity, while utilities had unusually high scores for language complexity. Analyst selectivity ratios were down for the quarter compared to last year. 

This mix of positive and negative sentiment may be an accurate reflection of the state of corporate results. According to S&P Global Ratings, earnings for global corporates are up in the first quarter. The quarterly results of commodity-dependent segments are volatile. But excluding these segments, revenues for corporates globally were up 2.3% annually and EBITDA  was up 2.7%. 

While the numbers look strong globally, North America played a big role in pulling up the average. North America was the only region where sales and EBITDA were up compared to the same quarter last year. Unsurprisingly, net positivity scores were also highest for North American companies, although Latin American net positivity scores appear to be improving.

Today is Monday, May 6, 2024, and here is today’s essential intelligence.

- Written by Nathan Hunt.

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