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Quarterly earnings calls are a numbing ritual of the corporate business world. Executives recite dry numbers and offer sunny assurances of continued growth. Analysts ask about financial minutiae, to ferret out details to help them predict future earnings.
But every once in a while, the veneer cracks, something unexpected happens, and earnings calls justify their existence.
That happened this week on the call of United Continental Holdings, parent of the beleaguered United Airlines, when analysts pressed for details about its promised turnaround and grew increasingly frustrated at the lack of transparency. CEO Oscar Munoz, already under fire for his clumsy handling of United’s forced removal of a passenger from an overbooked plane, begged for patience.
“I know everybody is getting scared about the fact that we are not going to give these numbers,” he said at one point. “[W]e have a very, very large company, with a lot of places that we are digging into. Let us do a little bit more of that work, and when we come out of it, we will be able to sort of provide you some better information around what we are thinking.”
In the carefully scripted world of corporate communications, United’s lack of clarity set off an earthquake. The shares tumbled as much as 10% and investors are now reportedly calling—loudly—for a shakeup of management. As Bloomberg notes in its story about the earnings-call debacle:
Before the call, “we had heard rumblings from the investment community about another potential management change at United Continental,” Helane Becker, an analyst at Cowen & Co., said in a note to clients. After the call, “they aren’t rumblings, but full-fledged screams.”
United is just the latest company to flub its earnings call this year. Sprint recently confused and frustrated analysts by promising that investor Masayoshi Son, CEO of Softbank, would join the call, only for his line to keep disconnecting—an awkward situation for any company, much less one in telecommunications. On a Snap call in August, an analyst who didn’t mute his phone could be heard questioning CEO Evan Speigel’s confused explanation about its push-notification policy. Brandon Ross of BTIG was overheard saying, “I didn’t even understand his response!”
When it comes to earnings calls, CEOs are damned if they do, and damned if they don’t. While Wall Street punishes mistakes, research suggests investors appreciate candor and want to hear spontaneous remarks from executives. Some tech companies are abandoning the scripted remarks, while at least one analyst is calling for an end to earnings calls altogether.
As a business reporter who has sat, glassy eyed, through dozens upon dozens of earnings calls, I understand the desire to kill them. But there can be value to hearing directly from executives, if only to catch them screwing up.