Q1 EARNINGS KEYWORD TRENDS ⚡

Analyzing how corporate vocab has changed over the past year

Ahhh… another earnings season has all but come & gone. We’ve seen surprise revenue beats & big misses, layoffs, wacky stock surges & a few stinkers — what a time it’s been.

And with all the action, it becomes a bit hard to know where to focus. I found myself wanting to read ~everything~ I could find, to see how companies at large are truly faring during these interesting times.

So… we did (kind of) — we went back through a random sample of 1,500 earnings transcripts from the past year, parsed every single word mentioned in each one, and calculated how the frequency of each keyword changed over time.

The results are pretty telling…

Over the past year, the earnings lexicon has shifted substantially. What was a trendy in early 2022 is now very different in 2023. And despite corporate Investment Relations Officers (IRO)’s best efforts to strategically pick neutral words to downplay the severity of their situations (which is literally their entire job), the truth still shines through in the macro view like Swiss cheese. 🧀

To summarize, here’s a list of the top 100 most-notable keywords with the biggest changes in mention frequency on earnings calls over the past year. Below we’ll wall through some of the top ones as a guide to deciphering what this truly means for you & your portfolio. 👇

EARNINGS SEASON IN 12 WORDS

A somewhat definitive guide to understanding what IRO’s are *actually saying*

When it comes to deciphering earnings-speak, the first thing to note is that there are certain words you’ll always hear on an earnings call — words like ‘growth’, ‘customers’, ‘strength’, & ‘guidance’ (no brainer right?)

But there are also words you’ll very *rarely* hear on these calls — ‘layoffs’, ‘cutbacks’, ‘pessimistic’, ‘miscalculated’, and ‘we were wrong’. Corporations know that using these words is an immediate red flag…

So you’ve gotta | read between the lines | to find the flags; look at how the words they *do* use change form quarter to quarter — that’s where the gold is baby.

Allow me to shed some light:

RISING KEYWORDS

First, a look at the words that’ve begun popping up A LOT more in recent times:

1. ‘Cost’ 🚩

• Mentions of the word ‘cost’ have increased +496% on earnings calls over the past year, which says just about everything you need to know about the state of the economy. As the economy has become rockier, big companies have been forced to focus much more heavily on costs (& cost cutting) than previous quarters.

2. ‘Cannabis’ 🚩

• This one’s a bit more fun — mentions of the word ‘cannabis’ have increased +417% (on average). This is the direct result of regulatory changes across the nation, as the federal government & multiple states actively peruse cannabis reform throughout 2023 (including MN, NH).

• Average mentions of the keywords ‘beer’ & ‘vape’ over the past year have also increased +327% & +54% respectively, again in light of regulatory changes (or perhaps IRO’s are just trying to take the edge off)

3. ‘Consumer’ 🚩

• End consumers are more in focus this year than ever, with the keyword ‘consumer’ being mentioned +319% more often on earnings calls this quarter vs. Q1 2022. The rough translation here: “people aren’t buying our stuff anymore, what gives??” — a testament to inflation’s effect on margins & the bottom line for many companies

4. ‘Inflation’ 🚩

• Speaking of inflation… the word ‘inflation’ has increased +284% in earnings mentions over the past year, mentioned roughly 7 times per call on average. It’s no question that the macro environment still has a looong way to go before big companies are feeling comfortable again…

5. ‘Compression’ 🚩

• And if that wasn’t enough for ya, the word ‘compression’ (as in multiple compression) has appeared +144% more often on earnings calls this quarter vs. last year. Multiple compression is when a company’s share price falls while earnings stay flat (or if price stays the same when earnings beat) — this signals that investors think valuations should be lower, which generally isn’t a good sign for the economy.

6. ‘Unemployment’ 🚩

• Last but not least: the word ‘unemployment’ has shown up +95% more often this quarter vs. last year (and roughly 2x as much as Q4 2022). Keep in mind the national unemployment rate has stuck around a historical low of 3.4% in recent months.

• Historically speaking, unemployment often reaches a cyclical lowpoint right before a recession materializes — aka: corporations are fully aware that this isn’t probably a bad sign for the economy to come…

VANISHING KEYWORDS

On the flip side, the words that corporations ~aren’t~ usng anymore also say A LOT. Some notable words that aren’t popping up nearly as often nowadays as they used to:

1. ‘Marketing’ 👻

• The word marketing has all but evaporated from the earnings lexicon over the past year, falling -67% in mention frequency compared to Q1 2022. Why? advertising budgets have been notoriously smashed as inflation effects *consumers’* buying habit (people buy less stuff → ads become less useful → marketing doesn’t go as far as it usef to)

2. ‘Backlog’ 👻

• This one is perhaps the most positive of the vanishing earnings keywords — the word ‘backlog’ has been used -71% less than a year ago, reflecting improvements in the major supply chain constraints that plagued the manufacturing industry through 2022. So I suppose Jerome Powell’s soaring interest rates & mile-high inflation weren’t good for nothin’ after all!

3. ‘Ukraine’ 👻

• During Q1 2022, Ukraine was mentioned roughly 1.4 times per earnings call (on average) as companies focused on the ramifications of the Russia-Ukraine war that began early last year. Nowadays, its old news… mentions of ‘Ukraine’ have declined -85% since Q1 last year.

4. ‘Excited’ 👻

• Pretty self-explanatory here… the word ‘excited’ was used -41% less on this quarter’s earnings calls vs. last year, showing a steady downward trajectory. Need I say any more about the state of the economy than this??

5. ‘Metaverse’ 👻

• Sorry Big Zuck… mentions of the word ‘metaverse’ have disappeared on earnings calls, down -99% since last year. Crazy to think that Meta’s future is now a thing of the past, good thing there’s always the AI bubble to fall back on!! (don’t worry, we did an entire blog post on AI earnings mentions, here).

6. ‘Cryptocurrency’ 👻

• Last but not least, ‘cryptocurrency’ mentions are also down -98% since last year, though the decline has admittedly been more of a trickle than an abrupt stop compared to ‘metaverse’ mentions — whether they’ll make a comeback is tough to say… I suppose we’ll have to wait for the post-SBF and post-SVB dust to settle.

Anyywayyyss… there you have it. The biggest takeaways from Q1 earnings season, summed up into 12 words. We’re living in assuredly different times than last year, and whether you like or not, you gotta admit: it’s exciting. 🔥

If there’s any words we missed or phrases you’d like to see trends for, let us know on Twitter (you can call us out @babbldev) and we’ll pull some more data for you. It might also be fun to see the stock price ramifications based on these keyword trends — do companies that over-indexed on using the word ‘cannabis’ this quarter outperform others? Hmmm…. 🤔

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