Guide · The earnings graph
Earnings read-through
When one company in a supplier link reports its results before the other, its results may say something about the other's, for example a big customer's sales hinting at its suppliers' orders. The lab is testing whether that holds; it is a hypothesis, not a signal to trade on.
The idea
Companies that trade with each other share news. If a large retailer reports weak sales, the makers of what it sells may be about to report weak orders. If a supplier reports a surge in orders, its customer may be about to report strong demand. Within a reporting season, companies report on different days, so the first of a linked pair to report may carry information about the second before the second reports.
That is a read-through. It runs both ways along a supplier link: supplier first, or customer first.
Is it real?
Research has found related effects. Studies of earnings announcements since the early 1980s have found that one company's results move the share prices of others in its industry (often called information transfer). Cohen and Frazzini (2008) found that news about a customer was slow to reach its suppliers' share prices.
The lab is testing a narrow version: whether the first release in a linked pair predicts the market's reaction to the second release, in the same season. Until that test has run, treat a read-through on this page as a question worth asking, not an answer. Nothing here is investment advice.
On the graph
During a season replay, a read-through is open on a day when one side of a link has reported in the current cycle and the other has not yet. The bar at the foot of the graph counts those due within 3 days, and the brightest amber lines show them. See dependency strength.