COVID-19

More companies suspending earnings guidance as economy tanks

Andy Uhler Apr 6, 2020
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Stocks plunged on March 9 — one of many bad days on Wall Street during the COVID-19 pandemic. Timothy A. Clary/AFP via Getty Images
COVID-19

More companies suspending earnings guidance as economy tanks

Andy Uhler Apr 6, 2020
Stocks plunged on March 9 — one of many bad days on Wall Street during the COVID-19 pandemic. Timothy A. Clary/AFP via Getty Images
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COPY

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Since March 16, 46 have withdrawn quarterly guidance and 151 have pulled annual guidance, according to the National Investor Relations Institute.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

What’s the latest on the extra COVID-19 unemployment benefits?

As of now, those $600-a-week payments will stop at the end of July. For many, unemployment payments have been a lifeline, but one that is about to end, if nothing changes. The debate over whether or not to extend these benefits continues among lawmakers.

With a spike in the number of COVID-19 cases, are restaurants and bars shutting back down?

The latest jobs report shows that 4.8 million Americans went back to work in June. More than 30% of those job gains were from bars and restaurants. But those industries are in trouble again. For example, because of the steep rise in COVID-19 cases in Texas, Gov. Greg Abbott, a Republican, increased restrictions on restaurant capacities and closed bars. It’s created a logistical nightmare.

Which businesses got Paycheck Protection Program loans?

The numbers are in — well, at least in part. The federal government has released the names of companies that received loans of $150,000 or more through the Paycheck Protection Program.

Some of the companies people are surprised got loans include Kanye West’s fashion line, Yeezy, TGI Fridays and P.F. Chang’s. The companies you might not recognize, particularly some smaller businesses, were able to hire back staff or partially reopen thanks to the loans.

You can find answers to more questions on unemployment benefits and COVID-19 here.

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