ENOUGH ALREADY: Ugh. Wall Street’s and corporate America’s obsession with quarterly earnings kabuki really is pointless.
“[Researchers at the University of Iowa] conducted in-depth interviews with some financial managers, most of whom admitted to issuing overly conservative guidance while their own private expectations about earnings were more optimistic, typically above the midpoint of their range. That helps explain why most earnings ‘surprises are to the upside—historically about 75%, according to data compiled by Bloomberg.
“’Managers seemed willing to say, “That is how the game is played. We want to beat estimates,”’ Hribar said.” [Emphasis added.]
Such value added! Here’s a thought: How about not playing the game in the first place? Instead, companies should stop giving quarterly guidance entirely. Cold turkey. Then, as sell-side analysts demonstrate—and they will—that they’re totally incapable of coming up with accurate quarterly estimates without lots of hand-holding from the companies they cover, they’ll stop publishing them at all, at which point companies can go back to focusing on making as much money for their shareholders as they can, which is supposed to be the point of the exercise in the first place.