Earnings guidance: Survey says many don't need it
Every three months, stress levels rise on Wall Street as many companies have to deliver on earnings guidance. In fact, many parties involved in the process would rather do without it.
That's the result of a survey in conjunction with the annual ICR XChange Conference, a meeting of more than 2,500 investors, management teams, analysts and bankers. Among the conference participants to respond, 46 percent said they would be just as likely to own shares in a company that doesn't give earnings guidance as one that does. Within groups, investors cared least about guidance while executives and advisors considered it a bigger factor.
Asked how frequently guidance should be given, 80 percent said that annual guidance (as opposed to the standard quarterly forecasts) would be frequent enough.
Companies often struggle with quarterly reporting because short-term promises can be a distraction from long-term goals. Investors can also be subject to volatile share prices if companies fall short of expectations.
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Quarterly earnings calls also appear to have limited appeal. Just 36 percent of respondents said quarterly earnings calls were among the best ways to interact with management and learn about a company. Other forms of communication scored much higher. At least 50 percent of respondents said they were interested in small group meetings at conferences, headquarters, or nondeal roadshows.
Social media, the newest form of investor communication, appears to work better for companies than their audiences. Only 33 percent of those surveyed said social media improves communications with investors some or most of the time.
Corporate respondents had the highest opinion of social media, with 51 percent saying it improves communication at least some of the time. At the other end of the spectrum, 19 percent of research analysts said it improves communication and 26 percent of buy-side investors said it helped.
The survey was conducted between September and December 2014.