Stock market trends can be measured on a chart, but can also be tracked using a calendar. Stock market trends will rhyme rather than repeat, but that’s enough to use them in order to help design a trading plan for the upcoming months. One of the calendar based stock market trends is earnings season, a time when surprises and disappointments can make or break the move in a particular stock.

It’s earnings season – a time to see which companies will beat their quarterly estimates, as well as those that will miss their estimates. Investors use the information provided in company earnings reports to determine whether or not they should hold, buy or sell a stock. Stock trading can heat up around earnings season.

Throughout this month, stock market players have been inundated with earnings reports. Headlines scream, “XYZ company’s earnings beat expectations; shares jump,” or “ZYX company misses expectations; shares drop.” Trying to figure out what all the meets, beats and misses info means can be daunting, but there are some points that can be gleamed from the reports, which can help investors with their investing decisions.

From earnings reports, investors can learn about the fiscal health of the company, as well as its sector. For example, one of the most watched and anticipated earnings reports is that of Alcoa. The company is the largest U.S. manufacturer of aluminum products, which are used by a wide array of industries ranging from construction and packaging to automobiles. Its fourth quarter, or 4Q, earnings reflected a loss, but that was in line with expectations. Its stock was not dinged by the market because the loss, considering the lower demand for aluminum was expected.

Earnings season happens four times a year. On a quarterly basis, publicly-traded companies report their how much they earned. The goal is to meet or exceed the earnings estimates of financial analysts. Falling short of these estimates can cause the company’s earnings to fall significantly.

Take Google, for example. When the Internet giant’s 4Q earnings came in weaker-than-expected, the company’s shares plunged more than 9% immediately after the announcement. Google’s earnings per share rose to $9.50 per share, but that was less
than the $10.49 per share that was expected. Furthermore, its net income was up to $2.71 billion, but that was less than the $8.41 billion that was expected.

Now take Apple, whose earnings exploded after it beat earnings in what was deemed a “blow out” fourth quarter. Its earnings soared more than 10%, with 4Q revenues coming in at $46.3 billion. That represents a per share rise to $13.87, which was above estimates of $10.10 per share. Despite that jump Apple’s stock, after the report was released, was down almost 7%.

As earnings season begins, there may be some upward bias depending on how companies fared in previous earnings seasons and the overall health of the economy. Ideally, investors hope company revenues outperform previous reports. However, events such as
the European debt crisis now worrying investors, can lead to pessimism about earnings reports.

As of mid-January 2012, only about 60% of the S&P 500 companies that had reported earnings saw their revenues exceed expectations. This may be an indication about how the 4Q earnings will come out overall. Some estimates place this percentage below the 70% from previous quarter reports. Stock market trends such as this need to be tracked so when things line, it can be used to help make decisions.