More companies suspending earnings guidance as economy tanks
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Guidance is a way for a company to help others assess what its stock is worth.
“Firms often choose to voluntarily initiate guidance so that they can help the market and investors and suppliers and a lot of people to understand what are their future expectations for performance,” said Kris Allee, an accounting professor at the University of Arkansas.
But right now, many companies don’t know what’s gonna happen tomorrow.
Since March 16, 46 have withdrawn quarterly guidance and 151 have pulled annual guidance, according to the National Investor Relations Institute. United Airlines, Twitter, Dell and Shopify are among them.
“It would be almost irresponsible for them to be able to provide guidance when they, themselves, don’t really have a full understanding of the effects this pandemic is going to have on their bottom line,” Allee said.
In normal times, it’s a bad look when companies clam up, according to Baruch Lev, professor of accounting and finance at NYU.
“When you stop guidance, the stock price is hit because it increases significantly [the] suspicion of investors. ‘Why did you stop? What’s the reason?’ ” he said.
But Ariel Fromer Babcock, head of research at FCLT Global, thinks the fallout from all these companies ditching guidance lately could be positive. Namely, less pressure to produce short-term results and more long-term strategic planning, which can provide a more accurate picture of a company’s health.
“We could see a real shift that could bring a whole wave of beneficial things in its path,” she said.
COVID-19 Economy FAQs
Are states ready to roll out COVID-19 vaccines?
Claire Hannan, executive director of the nonprofit Association of Immunization Managers, which represents state health officials, said states have been making good progress in their preparations. And we could have several vaccines pretty soon. But states still need more funding, she said. Hannan doesn’t think a lack of additional funding would hold up distribution initially, but it could cause problems down the road. “It’s really worrisome that Congress may not pass funding or that there’s information circulating saying that states don’t need additional funding,” she said.
How is the service industry dealing with the return of coronavirus restrictions?
Without another round of something like the Paycheck Protection Program, which kept a lot of businesses afloat during the pandemic’s early stages, the outlook is bleak for places like restaurants. Some in the San Francisco Bay Area, for example, only got one week of indoor dining back before cases rose and restrictions went back into effect. Restaurant owners are revamping their business models in an effort to survive while waiting to see if they’ll be able to get more aid.
How are hospitals handling the nationwide surge in COVID-19 cases?
As the pandemic surges and more medical professionals themselves are coming down with COVID, nearly 1 in 5 hospitals in the country report having a critical shortage of staff, according to data from the Department of Health and Human Services. One of the knock-on effects of staff shortages is that people who have other medical needs are being asked to wait.
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