Ugh. After collectively cutting way back on the practice at the start of the recession, more companies are starting to provide earnings guidance again.
I mean what, exactly, is the point? Companies that give guidance aren’t doing anyone any favors, since a) No one, not even mighty corporate executives, can accurately say what the future holds, which—as investors have found again and again—makes guidance useless, b) Guidance serves as an entirely artificial near-term bogey (and distraction) that can at times tempt managements to make bad decisions, and c) It’s of exactly zero use to actual investors like me, as opposed to sell-side analysts, who can be counted on to always be clamoring for it. Anyway, companies really should just stop.
Enough With Earnings Guidance
By Thomas K. Brown,
Ugh. After collectively cutting way back on the practice at the start of the recession, more companies are starting to provide earnings guidance again.
I mean what, exactly, is the point? Companies that give guidance aren’t doing anyone any favors, since a) No one, not even mighty corporate executives, can accurately say what the future holds, which—as investors have found again and again—makes guidance useless, b) Guidance serves as an entirely artificial near-term bogey (and distraction) that can at times tempt managements to make bad decisions, and c) It’s of exactly zero use to actual investors like me, as opposed to sell-side analysts, who can be counted on to always be clamoring for it. Anyway, companies really should just stop.