AI Reshapes Earnings Call Analysis: LLMs for Stock Selection
Analysts and investors are increasingly leveraging generative AI to analyze earnings calls, but new research indicates that large language models (LLMs) are poised to become powerful tools for stock selection. A recent study by S&P Global Market Intelligence highlights how LLMs can extract actionable trading signals from earnings call transcripts.
Traditional Sentiment Analysis vs. LLMs
Traditional financial sentiment analysis relied on simple word lists, assigning sentiment scores based on the frequency of positive or negative phrases used by CEOs and CFOs during earnings calls. This rules-based system was transparent but lacked nuance. For example, counting phrases like "strong growth" vs. "unexpected losses."
LLMs, conversely, interpret context and language structure, recognizing that phrases like "growth slowed less than expected" are positive despite containing negative words. This allows for a more accurate and insightful analysis of earnings call transcripts.
LLM Performance and Precision
The S&P Global Market Intelligence study found that fine-tuned LLM strategies could deliver double the excess return compared to traditional approaches, particularly as market inefficiencies shrink. A long-short strategy using LLM-based signals achieved 8.4% annual returns, twice the performance of traditional benchmarks (4.2%).
“The real edge is precision,” said Mengmeng Ao, quantitative research analyst at S&P Global Market Intelligence. “Lexicons do well at the headline level, but LLMs separate what’s material from what’s noise. That context is what investors care about.”
The study also revealed that when LLMs flagged highly important financial events, sentiment signals delivered 6.4% excess annual returns—double those for medium-importance events (3.2%) and nearly four times those for low-importance events (1.7%).
New CFO Appointments
Brett Summerer has been appointed CFO of Accel Entertainment, Inc. (NYSE: ACEL), effective Sept. 22. He succeeds Mark Phelan. Summerer's prior roles include leadership positions at Kraft Heinz, Corning, and General Motors.
Josh Greear was appointed CFO of Authority Brands, a multi-brand franchisor in the home services sector. Greear previously served as CFO at Primrose Schools and held leadership roles at Cracker Barrel.
CIO-CFO Partnership for Technology Investment
According to Gartner, a strong partnership between the CIO and CFO is critical for managing technology spending, risk, and value across the company. As digital investments become vital for competitiveness and growth, the distinction between “IT” and broader enterprise strategy continues to blur.
Key Steps to Build a Strong CIO-CFO Partnership (Gartner Recommendation)
- Financial transparency: map IT spend from four stakeholder perspectives.
Podcast on AI Impact
The latest edition of "This Week in Business," a podcast from The Wharton School, examines the impact of artificial intelligence. Kent Smetters explores how AI could affect productivity, GDP, and federal debt.
Overheard
"Getting fired from Salomon Brothers drove home a lesson that I’ve carried throughout my career in business, government, and philanthropy: Every setback is an opportunity."
—Mike Bloomberg, billionaire businessman, politician, and philanthropist
