Protecting the Blindside: Managing Sell-Side Analysts’ Perceptions of the “Small Stuff”
• Analysts are constantly “making bets on company management” and every bit of interaction they have with a company impacts their perception of senior management’s competence.
• An analyst’s impression of a company’s entire communications infrastructure plays a critical role in their evaluation of a company’s prospects.
• Based on the results from our most recent study of prominent sell-side analysts, this memo highlights the components of a company’s communications infrastructure that, from analysts’ point-of-view, are too often neglected: the IR team and the earnings press release.
Analysts’ Top Frustrations
1. IR staff that merely “stick to the press release.”Analysts complain that IR teams are too often either unwilling or unable to provide “some color” to the information contained in the press release (“Don’t just refer me to the press release when I call - help me out.”).
2. Press releases that lack substantive consistency.Any shifts in the metrics reported make analysts’ lives exponentially more difficult and raise eyebrows about a company’s prospects (“Why would they all of a sudden stop showing that data?”).
3. Press releases that lack structural consistency.Any changes in the format of the release (e.g., chart type), no matter how minor, makes analysts’ jobs more difficult (“I want to be able to compare each press release to the last one.”).
4. An IR team that lacks message discipline.Analysts get extremely irritated when they get (even a slightly) different story from different members of the IR team.
5. IR contacts that do not return calls the same day.Unreturned calls are perceived as a strong indication that IR – and by extension the company and its senior management – doesn’t respect analysts.
How to Stay on Good Terms with Analysts
1. Ensure that IR team members are a valuable resource to analysts, and have:
• A clear and solid knowledge of all the “basic” information.
• An ability and willingness to provide some insights beyond what is contained in the press release.
• Direct access to senior management (“Someone who sits in on strategy sessions and meetings.”).
2. Display a clear respect for analysts and the pressures they face by:
• Returning calls promptly (the same day).
• Providing analysts with consistent information, including press releases with the same metrics in the same format each quarter.
• Delivering press releases “on time” (even a delay of a couple of minutes is considered to be a problem), and in an immediately printable format (“If it doesn't have page breaks, it really slows me down.”).
3. Treat analysts like colleagues by:
• Acknowledging if the company is facing challenges (“Don’t insult us – we can see spin a mile away.”)
• Calling analysts proactively after earnings calls to see if they have questions/need clarification.
• Providing feedback on analysts’ models (“If I made a mistake, please let me know.”).
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