Managers are thought to possess important insider information. Thus, investors attend not only to the factual information managers announce, but also to how they convey it. The short-term market returns after earnings announcements have been shown to depend heavily on managers’ choice of words. We investigate whether this market behavior is rational, and whether an analysis of a manager’s choice of words can provide rewarding information about future company fundamentals. We collect data from conference calls, which are less formalized than written earnings press releases, to see whether gleanings from managers’ words do reveal information. Our analysis has three parts. First, we study how past results influence the manager’s choice of words on conference calls. We find that positive earnings surprises, stock returns and changes in earnings reduce the use of negative tone. We also investigate evasive tactics. For example, differences in the prepared and the improvised parts of managers’ speech might signal uncertainty or insincerity. We observe greater use of such evasive maneuvers (“paltering”) when poor results must be presented. Second, we document that negativity and paltering tactics are associated with higher variability of analyst forecasts, with more revisions, and with slower responses of analyst recommendations to the conference call. Investors react more cautiously to earnings surprises when managerial tone is negative or inconsistent. Third, we examine the implications of negativity in a manager’s words beyond that explained by past performance. It proves to predict the future earnings of the company. Moreover, analysts’ forecasts do not take this into account sufficiently. We also show that as early as four quarters before a company’s bankruptcy, its managers’ verbal negativity increases significantly relative to surviving companies, even after controlling for the company’s accounting performance.