Just say no to earnings predictions

Ashley Milne-Tyte Jul 24, 2006

TEXT OF STORY

SCOTT JAGOW: No doubt you’ve heard us say a certain company beat Wall Street expectations. Or fell short of expectations. That’s the lingo when a public company reports its earnings, like a lot of public companies are doing right now. Investors look at how well the company said it would do, versus how well it actually did. But today, a big business group is calling on companies to stop giving Wall Street those predictions. Ashley Milne-Tyte has more.


ASHLEY MILNE-TYTE: The Business Roundtable Institute for Corporate Ethics spoke to CEOs, CFOs and institutional investors. All agreed that the obsession with meeting earnings targets doesn’t help create value in a company.

Brian Moriarty is a spokesman for the Institute.

BRIAN MORIARTY: “A number of CFOs actually report that their companies have actually foregone strategic investments in order to meet quarterly earnings expectations.”

And then there’s the stress of trying to keep Wall Street smiling.

MORIARTY: “We’ve had one executive compare the whole quarterly guidance earnings game to attempting to land a 747 on a postage stamp.”

Ending earnings guidance wouldn’t have to leave investors in the dark.

Moriarty says companies that don’t issue guidance wind up giving out more useful information, such as real-time sales numbers.

In New York, I’m Ashley Milne-Tyte for Marketplace.

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