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Are Fewer Companies Issuing Quarterly EPS Guidance Since Comments from Buffett and Dimon?

Companies and Earnings

By John Butters  |  September 24, 2018

 “In both national policy and business, effective long-term strategy drives economic growth and job creation. For public companies, these same principles are true. That’s why today, together with Business Roundtable, an association of nearly 200 chief executive officers from major U.S. companies, we are encouraging all public companies to consider moving away from providing quarterly earnings-per-share guidance. In our experience, quarterly earnings guidance often leads to an unhealthy focus on short-term profits at the expense of long-term strategy, growth, and sustainability.” -Jamie Dimon and Warren E. Buffett (June 6,2018)

Jamie Dimon and Warren Buffet made these comments in June, after most S&P 500 companies had already issued EPS guidance for the second quarter. Heading into the end of the third quarter, have fewer companies in the S&P 500 issued quarterly EPS guidance for the quarter compared to recent averages?

The answer is yes. As of today, 98 S&P 500 companies have issued EPS guidance for the third quarter. Over the past year (four quarters), 112 S&P 500 companies on average issued quarterly EPS guidance. Over the past five years (20 quarters), 107 S&P 500 companies on average issued quarterly EPS guidance. If 98 is the final number for the quarter, it will mark the lowest number of S&P 500 companies issuing EPS guidance for a quarter since Q1 2015 (97). 

Number of Companies Issuing Quarterly EPS Guidance

Temporary Change?

It is important to note that the decrease in the number of S&P 500 companies issuing EPS guidance for the third quarter may be due to the uncertainty surrounding trade deals and the impact of tariffs. Companies may be more reluctant than usual to issue quarterly EPS guidance (particularly positive EPS guidance) amid this uncertainty. 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.

The term “guidance” (or “preannouncement”) is defined as a projection or estimate for EPS provided by a company in advance of the company reporting actual results. Guidance is classified as negative if the estimate (or mid-point of a range estimates) provided by a company is lower than the mean EPS estimate the day before the guidance was issued. Guidance is classified as positive if the estimate (or mid-point of a range of estimates) provided by the company is higher than the mean EPS estimate the day before the guidance was issued.

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John Butters

Senior Earnings Analyst

John’s weekly research report, Earnings Insight provides analysis and commentary on trends in corporate earnings data for the S&P 500, including revisions to estimates, year-over-year growth, performance relative to expectations, and valuations. He is a widely used source for the media and has appeared on CNBC, Fox Business News, and the Business News Network. In addition, he has been cited by numerous print and online publications such as The Wall Street Journal, Financial Times, The New York Times, MarketWatch, and Yahoo! Finance.

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