Guidance

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Guidance

It is increasingly important for firms to meet or exceed analysts' consensus earnings forecasts. Often management will give guidance or hints of the earnings per share prospects over the next quarter or next year to try to direct the consensus to what is achievable. For example, it is possible that the consensus is well above management's internal forecasts. Management will try to guide the consensus downwards so that when the earnings are released the negative surprise is minimized. Under Regulation FD, management needs to be very careful to provide guidance information to all shareholders -- not just a select group of analysts. This is often achieved in investor presentations (that are often webcast) or conference calls (where anyone is allowed to dial in).

Guidance

An announcement, often over a conference call, by a publicly-traded company of its projected earnings for a quarter or year. Guidance gives investors and analysts a basis from which to make their investment decisions and recommendations. Guidance also helps the company price out any potential good or bad news so its share price is not subject to wild fluctuations when the earnings are actually announced. Guidance is also called earnings guidance.

Guidance.

Guidance, or earnings guidance, occurs when the executives of a publicly traded corporation estimate projected earnings in an open conference call or Web cast before its quarterly earnings are released.

Goals for providing guidance include underplaying expectations to avoid negative surprises, serving as a counterpoint to stock analysts' consensus estimates, reducing stock price volatility when actual results are announced, and potentially shifting investor focus from short-term results to long-term perspectives.

Corporations also provide guidance to the investing community as a whole because they are prohibited by Securities and Exchange Commission (SEC) Rule FD (for Fair Disclosure) from providing important and previously nonpublic information selectively, as they did before the rule was enacted in 2000.

Those who advocate providing this type of guidance argue that the more information investors have the better. Detractors say guidance doesn't reduce volatility or achieve other goals.

References in periodicals archive ?
FIGURE 1 About 60% of S&P 500 Firms Gave Earnings Guidance # % Quarterly guidance only 29 5.
First, CAPEX/SPD guidance is long term, whereas earnings guidance is typically about the current period.
Principally among these alternatives are switching from annual guidance to quarterly guidance -- since it is assumed that companies should at least have some visibility into the next three months -- and providing a wider range of earnings guidance than normal.
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The company also provided 2007 operating earnings guidance for each of its business segments, which is shown in the table below along with revised 2006 operating earnings guidance.
CFA Institute members surveyed approve of the use of yearly earnings guidance more than the use of quarterly earnings guidance.
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The company reaffirmed its earnings guidance for 2006, as most recently updated in connection with the third quarter earnings release, of a range from $1.
This release contains forward-looking statements, including statements regarding the Company's results of operations, including earnings guidance for the first quarter of fiscal year 2007, and accelerated markdown expectations.
The Company also announced that it is revising its earnings guidance for the year to $1.
Management is revising 2006 earnings guidance to reflect the impact of the non-recurring earnings described above in the amount of $0.