Dimon and Buffett's call to stop quarterly guidance by companies may already be having an impact

Key Points
  • Jamie Dimon and Warren Buffett in June called for an end to quarterly guidance, asserting that it encouraged short-term thinking about corporate executives.
  • With third-quarter earnings season looming, the fewest companies in three years have offered pre-announcements.
  • One reason for the decline, though, may be uncertainty over tariffs and their impact.
Jamie Dimon, Chairman and CEO of JP Morgan Chase. 
Dylan Martinez | Reuters

Just months after Jamie Dimon and Warren Buffett issued a call for an end to quarterly earnings guidance, companies may be heeding the call.

With third-quarter earnings season less than three weeks away, fewer companies than normal are issuing pre-announcements than the norm.

Thus far, 98 members of the have issued guidance, a decline from the average 112 and below the typical 107 for any given quarter, according to FactSet. While the drop-off isn't precipitous, it is the lowest level in 3½ years.

Back in June, Dimon, CEO of J.P. Morgan Chase, and Buffett, legendary head of Berkshire Hathaway, called for an end to the pre-announcements as a way to halt short-term thinking in corporate America. They reasoned that companies spend too much time trying to make their quarterly numbers and an "unhealthy focus on short-term profits at the expense of long-term strategy, growth and sustainability," as they said in a Wall Street Journal op-ed and later in a joint CNBC appearance.

"Companies frequently hold back on technology spending, hiring, and research and development to meet quarterly earnings forecasts that may be affected by factors outside the company's control, such as commodity-price fluctuations, stock-market volatility and even the weather," they wrote on June 6.

Tariff effect?

Two months later, President Donald Trump upped the ante, saying he wanted the Securities and Exchange Commission to study ending quarterly reports altogether in favor of semiannual filings.

However, FactSet cautioned that it's not yet clear why company guidance is lower than normal for the upcoming season.

John Butters, senior earnings analyst at the data provider, said one reason may be "the uncertainty surrounding trade deals and the impact of tariffs."

The White House has leveled $200 billion in tariffs against a slew of Chinese goods, prompting retaliation by China. Butters said companies may be especially reluctant to issue positive guidance without knowing how long the tariff battle will last.

"It will bear watching to see if a smaller number of companies issue quarterly EPS guidance in subsequent quarters after the trade and tariff situations are resolved," Butters wrote.