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 ?
In fact, we don't have to follow our own guidance, as we make perfectly clear in every guidance that we put out.
If you are not required to follow guidance, then for God's sake please never, ever, ever follow draft guidance, as that is only our current thinking.
You may think that acting on guidance gives you a "safe harbor" from regulations.
The draft guidance also contains a "Guiding Principles" portion that replaces the "Assumptions/Axioms" section of the original K-97 Memo.
Additionally, the draft guidance contains a "How to Use This Guidance" section, which replaces the K-97 Memo section called "The Model." This section is also quite valuable because it clearly describes how the guidance document should be used.
The draft guidance sub-sections on "Labeling Changes," "Technology Engineering, Performance Changes," "Materials Changes," and "Technology, Engineering, Performance, and Materials Changes for In-Vitro Diagnostic Devices," which are part of Section 5 ("How to Use This Guidance") remain substantially equivalent to the original K-97 Memo, though they have been updated to add clarity.

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