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Since March 16, 46 have withdrawn quarterly guidance and 151 have pulled annual guidance, according to the National Investor Relations Institute.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
Can businesses deny you entry if you don’t have a vaccine passport?
As more Americans get vaccinated against COVID-19 and the economy begins reopening, some businesses are requiring proof of vaccination to enter their premises. The concept of a vaccine passport has raised ethical questions about data privacy and potential discrimination against the unvaccinated. However, legal experts say businesses have the right to deny entrance to those who can’t show proof.
Give me a snapshot of the labor market in the U.S.
U.S. job openings in February increased more than expected, according to the Labor Department. Also, the economy added over 900,000 jobs in March. For all of the good jobs news recently, there are still nearly 10 million people who are out of work, and more than 4 million of them have been unemployed for six months or longer. “So we still have a very long way to go until we get a full recovery,” said Elise Gould with the Economic Policy Institute. She said the industries that have the furthest to go are the ones you’d expect: “leisure and hospitality, accommodations, food services, restaurants” and the public sector, especially in education.
What do I need to know about tax season this year?
Glad you asked! We have a whole separate FAQ section on that. Some quick hits: The deadline has been extended from April 15 to May 17 for individuals. Also, millions of people received unemployment benefits in 2020 — up to $10,200 of which will now be tax-free for those with an adjusted gross income of less than $150,000. And, for those who filed before the American Rescue Plan passed, simply put, you do not need to file an amended return at the moment. Find answers to the rest of your questions here.
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