The Debate Over Quarterly EPS Guidance
Should companies stop issuing quarterly earnings guidance? That was a major topic of discussion on today's "Morning Call."
Dean Krehmeyer, executive director of the Business Roundtable Institute for Corporate Ethics, says yes because focusing on quarterly earnings per share guidance often forces companies to concentrate on the here-and-now while under-investing in the future.
“What we advocate is changing the mindset from talking about a very precise earnings per share number each quarter and instead changing the conversation among companies and users of financial statements to the strategic long-term value drivers in the industry,” Krehmeyer told CNBC’s “Morning Call.”
Mark Hynes, a member of PR Newswire’s Disclosure Advisory Board, says there is no “one size fits all” answer to the need for guidance.
“I don’t think anyone would argue that companies need to take a longer view,” Hynes said. “However, there will be companies for whom shorter-term guidance, including EPS guidance, is absolutely appropriate.”
He says the benefits of providing quarterly guidance include satisfying basic requests for information from analysts, maintaining communication with investors and identifying how management will meet its financial targets.
Next week, the U.S. Chamber of Commerce will recommend that all publicly traded companies stop issuing quarterly EPS guidance.