Risk & Compliance

Survey: Companies Go Long on Earnings Guidance

Fifty-eight percent provide annual estimates, while 27 percent provide quarterly estimates, NIRI study finds.
Alan RappeportJuly 24, 2007

Companies are providing more long-term forecasting and performance measurements and focusing less on quarterly earnings-per-share guidance, according to a recent survey by the National Investor Relations Institute.

Of the 752 companies that provide earnings guidance and responded to the survey, 58 percent provide annual estimates while 27 percent provide quarterly estimates. NIRI interim CEO Linda Kelleher said that the results indicate “that companies are providing a broader, more qualitative, and nuanced picture of the opportunities, challenges, and strategies they face.”

The survey also found that most companies saw no impact on valuation, stock price, or shareholder turnover as a result of broader, long-rage guidance. Most companies said that they provide guidance to ensure reasonable performance expectations. Earnings-per-share and revenue are the most commonly provided measures, according to the survey.

Some companies have scrapped earnings guidance all together. But a new study called “To Guide or Not to Guide?” argues that cessation is not the solution, either. Of 222 firms that stopped providing earnings guidance to be “free from market myopia,” there were no signs of increased research-and-development or capital investments. In fact, 31 percent of the companies resumed quarterly guidance after 18 months.

Still, some suggest that a longer-term strategy is the best compromise. “NIRI has long advocated for public companies to take a more comprehensive view of guidance,” Kelleher said.