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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).


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, 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 ?
Of note, the decision to provide earnings guidance follows industry lines.
FIGURE 2 Incidence of Earnings Guidance Varies By Industry Sector Number of Firms Yes No Total %Yes Consumer Discretionary 47 35 82 57.
Giving top-line projections is typically a supplement to earnings guidance.
com) is head of International for Progressive Insurance, a firm that does not offer earnings guidance.
First, CAPEX/SPD guidance is long term, whereas earnings guidance is typically about the current period.
Prior voluntary disclosure research rarely takes the portfolio view and predominantly focuses on earnings guidance because of the importance of earnings in financial reporting and data availability.
This "snapshot," taken in spring 2006, was the last annual earnings announcement before the CFA Institute initiated the call to replace earnings guidance with nonearnings guidance.
CFA Institute members surveyed approve of the use of yearly earnings guidance more than the use of quarterly earnings guidance.
In addition to earnings guidance, respondents provided financial guidance on revenue, capital expenditures and tax rate guidance most frequently.
The recommendations reached in our joint report with the Business Roundtable Institute remain relevant and are important, in particular, having companies move away from the practice of providing quarterly earnings guidance, while providing more detailed information about a broader range of long-term information," noted Jeff Diermeier, CFA, president and CEO of CFA Institute.
Today's revised earnings guidance pertains only to the non-recurring earnings of $0.
The table below shows the previous earnings guidance issued on August 2, 2006 and the currently revised earnings guidance.