Ask Matt: Why does earnings season matter?

Q: Why does earnings season matter?

A: Stock investors only get a good look at companies’ financials four times a year. These data points are telling in many ways and among the best indicators investors get about how companies are performing.

First-quarter earnings season kicked off Monday with the report from aluminum maker Alcoa, and that’s just the start. This week 15 companies in the Standard & Poor’s 500, including mostly the big banks, are expected to report their results. Earnings season is important because it’s a rare opportunity for investors to size up how companies are doing relative to expectations. Wall Street analysts routinely forecast what companies are expected to earn in the quarter and year and investors pay close attention to how well management is tracking to those expectations. But it’s not just a short-term trading game during earnings season. Some management will also provide guidance about what investors can expect in future quarters.

Guidance from management is always important, but investors will be paying attention to see if companies are likely to see things improve with earnings growth in the back-half of the year. Investors expect earnings to rise 4% in the third quarter and 9% in the fourth quarter.

Paste BN markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at mkrantz@usatoday.com or on Twitter @mattkrantz.