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Since March 16, 46 have withdrawn quarterly guidance and 151 have pulled annual guidance, according to the National Investor Relations Institute.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

Which businesses are allowed to reopen right now? And which businesses are actually doing so?

As a patchwork of states start to reopen, businesses that fall into a gray area are wondering when they can reopen. In many places, salons are still shuttered. Bars are mostly closed, too, although restaurants may be allowed to ramp up, depending on the state. “It’s kind of all over the place,” said Elizabeth Milito of the National Federation of Independent Business.

Will you be able to go on vacation this summer?

There’s no chance that this summer will be a normal season for vacations either in the U.S. or internationally. But that doesn’t mean a trip will be impossible. People will just have to be smart about it. That could mean vacations closer to home, especially with gas prices so low. Air travel will be possible this summer, even if it is a very different experience than usual.

When does the expanded COVID-19 unemployment insurance run out?

The CARES Act, passed by Congress and signed by President Donald Trump in March, authorized extra unemployment payments, increasing the amount of money, and broadening who qualifies. The increased unemployment benefits have an expiration date — an extra $600 per week the act authorized ends on July 31.

You can find answers to more questions here.

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