A recurring – and some would say nerve-racking – event is the sell-side analyst briefing. A sell-side analyst works for a brokerage or financial advisory firm that manages individual accounts. The analyst makes stock recommendations and earnings forecasts to clients of the firm.
Public corporations assiduously court these analysts because a favorable rating by an analyst can positively impact a company’s stock price. Thus, the CEOs and CFOs who typically conduct calls to announce earnings need to get analysts excited about the company.
But often these meetings fall flat because the analysts are bored by the dull recitation of facts.
Grab Their Attention
Analysts have become jaded because they participate in so many briefings.
If you’re involved in prepping your CFO and/or CEO for an analyst call, come up with a “grabber” for the presentation — a startling statistic or product innovation. This will add context to the presentation so analysts and investors can quickly understand your company’s value and unique differentiators.
Put the analyst in the shoes of the company’s customers – how they experience the company’s products and services.
We always advise clients to stand while talking, whether it’s an analyst call, or phone interview with a reporter. Use gestures as you would in a face-to-face meeting. Body movements help you put your nervous energy to work in a positive way and add inflection and passion to what you’re saying.
Analysts can tell when you’re not invested in the call. We once worked with an investor relations director who couldn’t understand why the company’s executives weren’t getting on well with analysts. She asked me to sit on the call and report my observations.
It soon became clear that the presenters sounded bored. You could hear them tapping pencils on the conference table, pouring water into glasses and making other distracting noises.
As the meeting was winding down, the company executives began packing it in before the call was over. The analysts got the message they weren’t engaged and didn’t care. That obviously was not the intended message.
Find Your Comfort Zone
Analyst phones calls can be stressful. First, you’ve got to ensure that you are in compliance with SEC regulations and that everyone has equal access to all material and not just preferred investors.
Just last week Black Rock, the largest wealth management company in the world, agreed to end its practice of surveying Wall Street analysts for clues about their views on companies before those opinions were publicly issued.
Speak with authority. Communicate your passion about the company and its future. If you’re too nervous to speak extemporaneously, then use a script or cue cards.
Practice until you find your comfort zone. You’re the expert so you will always know more than your audience.
Summarize what you discussed in your last briefing before launching into your key messages. That will bring everyone up to speed, especially the analysts who weren’t on the last call. End the presentation with a recap of your key points AFTER the last question has been answered.
What Analysts Want
A 2013 study Inside the “Black Box” of Sell-Side Financial Analysts, by researchers at four major universities, found that analysts don’t like to share information with other analysts in the Q&A.
One analyst stated, “There are three things that can happen when you ask a question on an earnings call: one, you sound like a complete idiot; two, they give you no information at all; and three, you get a really insightful answer except you’ve just shared it with all your competition. So I don’t ask questions on calls.”
That’s why it’s crucial that a company schedule analyst “call-backs” immediately after their public earnings conference calls. Analysts in the study said these calls are extremely important because they can get their individual questions answered and build on their relationships with senior management.
Tierney Saccavino, Senior Vice President, Corporate Communications, for Acorda Therapeutics, Inc., said, “We’re always available to analysts immediately after every earnings call. We can give them access to different members of the management team, or possibly to the medical staff for insights into the programs they are developing.”
She noted, “Everyone who serves as an Acorda spokesperson receives training so they are clear about messaging and compliance.”
These call-backs matter to the company, too, she said.” It’s just as important to prepare for these individual calls as it is for the conference call.”
Be Ready for the “Squirmers”
Know your key messages, practice them, and be prepared for what we call the “squirmers.” These are the questions that make you uncomfortable and you’d rather not answer.
Analysts can be persistent. They’ll ask the same question several different ways, but, as Tierney advises, “Analysts will push you for more details than you’re ready to provide. Be disciplined and stick to your messaging.”
Sell-side analyst calls are a necessary part of every IR professional’s job. Be as prepared as you can be by providing analysts with information relevant to the call and training your spokespersons to use a “grabber” that will keep them wanting to hear more.
This is the first in a three-part series on investor relations. Next week we will discuss how to present to venture capital companies. The following week we will describe how to prepare for and participate in an IPO road show.
- Analysts Are Not Paid to Make Stock Recommendations (ritholtz.com)
- Cognitive Dissonance: Sell-Side Stock Analyst “Expectations” Edition (zerohedge.com)
- Understanding Analysts (urassociatesin.wordpress.com)