We're officially halfway through this quarter's earnings season. As the ups and downs of a company's quarter are scrutinized for possible clues into future performance, Blackrock CEO Larry Fink is calling for the end of quarterly guidance.
"It's just a crutch for analysts to use"
On the Halftime Report today, our experts debated the pros and cons.
"Investors need to be more educated on what to look for in guidance"
Overall, the desk was split on the value of quarterly guidance. "Corporations have no incentive to give an optimistic outlook," said Estimize CEO Christine Short, which is part of the reason why many companies continuously beat estimates. Quarterly guidance can even be harmful in the sense that it doesn't always accurately portray a company's true position. As Short noted, "it's just a crutch for analysts to use, and the analysts rarely stray from what the corporation has said." Short would prefer a more substantive, longer-term outlook.
Pete Najarian largely agrees with Short. While he argues that we are an information-hungry society--as evidenced by the degree to which Google's earnings were dissected--he thinks that sell-side analysts shouldn't rely so heavily on company guidance. Instead, analysts should be digging deeper to find out what's really happening.
Stephanie Link, on the other hand, thinks quarterly guidance might not be so bad. She notes that European companies--which typically only give guidance twice a year--are ultimately hurt from the lack of transparency.
Like Najarian, Link likes information, noting that how you interpret what you're given is important. She is less concerned with the potential for analysts to be impacted by company guidance, since she believes independent research should be done regardless of what they publish.
Joe Terranova notes that J.P. Morgan CEO Jamie Dimon has also called for the end of quarterly guidance. Terranova argues that whether or not you like continued guidance is likely based on who owns your stock. If you have institutional ownership, you can get away with not delivering on estimates since investors won't leave. If you don't, you will never attract ownership if you don't issue guidance.
Trader disclosure: On February 2, 2016 the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Halftime Report" were owned by the "Halftime Report" traders:
Pete Najarian: Long AAPL, BAC, BKE, BMY, BP, DIS,DISCA, FOXA, GE, KMI, KO, MRK, PEP, PFE. Long calls AAL, BX, CHS, DAL,GDX, GE, HAIN, LC, MSFT, MTG, NRF, SLV, SWN, UAL, WEN, WMB, WYNN, YDKN. Long puts FCX, MRO
Jon Najarian: Long calls BWLD, JNJ, MCD, MDLZ, MSFT, NBR, OAS, RCL, STO, SWHC, TWX, WEN
Stephanie Link: Long AAPL, ACE, AVGO, BAC, CCL, COST, CRM, CVX, DAL, DLPH, DOW, EL, ESRX, GILD, GOOG, GOOGL, INTC, JPM, LLY,LPX, LRCX, LULU, MCD, MS, PF, PG, PPG, PRU, QCOM, RHT, SBUX, SLB, SWK, SYF,TJX, UNH, URI, V, WBA, WFC, WHR, WMT
Joe Terranova: Long VRTS.