An End to Quarterly Guidance? A Horrible Idea…

By Douglas A. McIntyre Published Jun 18, 12:40AM EDT

Follow 24/7 Wall St. on Google

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

The Financial Times has an article outlining a growing movement in corporate America for the end to quarterly guidance. The argument is that it will curtail the influence of short-term investors and hedge funds, and that argument is as credible that a monopoly offers the best prices to consumers. So what if short-term traders make money on this as trading opportunities. There is one issue that is true, and that is that there is too much demand on companies to communicate. Making predictions every 6 weeks is a bit much, but if a company want access to the public markets they should have to maintain their same structure. Mid-quarter updates are definitely demanding of too much communication and are being paired back more and more, but allowing all companies to end guidance is a step backward by more than 10-years.

Companies are not currently forced to give guidance by law, but analysts and investors expect it. Most times a company says "we are adopting a policy of no longer offering guidance after our earnings" ends up with their stock selling off. After all, if the guidance is good they are more than eager to give this. If they want this structure then they need to be figuring ways to go private so they can bypass all the expectations and regulations. Too much information can be just as problematic as too little information, but too little information is worse in that it makes forecasting even that much harder.

Jon C. Ogg
June 18, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.