Financials -- Guiding Less

May 23, 2005

The percentage of companies providing earnings guidance is declining.

Although a substantial majority of corporate members of the Vienna, Va.-based National Investor Relations Institute (NIRI) still provide guidance on expected earnings, the percentage doing so is now 71%, down six percentage points from 77% in December 2003.

However, for those companies continuing to give guidance, a range of earnings-per-share estimates is the most common kind of information they give, with four of five companies NIRI recently surveyed doing that. Sixty percent offer revenue estimates. Some 10% provide an earnings model, and 5% estimate a specific earnings-per-share number. Thirty percent use a variety of other means to advise securities analysts of their expected earnings. (The percentages add to more than 100%, reflecting that individual companies may provide earnings guidance in several ways.)

In a clear trend toward greater disclosure, 93% of the companies surveyed now update their earnings guidance if there's a "material" change in their financials, compared with 80% of companies in 2003. Putting out a news release is by far the most common means they use to provide updated guidance; 83% of companies surveyed do it. Forty percent set up a fully accessible conference call, and 48% put the information in an 8-K filing with the U.S. Securities & Exchange Commission.

While 64% of the companies surveyed say they're not considering ending earnings guidance, down significantly from 78% in 2003, nearly half (47%) claim if they were to stop providing guidance, it would have no impact on analyst coverage. Thirty-two percent say it would have some impact, and 2% believe it would cause them to lose analyst coverage altogether.

The survey included 527 NIRI member companies whose market capitalization ranges from under $100 million to more than $10 billion.

About the Author

John McClenahen | Former Senior Editor, IndustryWeek

John S. McClenahen, is an occasional essayist on the Web site of IndustryWeek, the executive management publication from which he retired in 2006. He began his journalism career as a broadcast journalist at Westinghouse Broadcasting’s KYW in Cleveland, Ohio. In May 1967, he joined Penton Media Inc. in Cleveland and in September 1967 was transferred to Washington, DC, the base from which for nearly 40 years he wrote primarily about national and international economics and politics, and corporate social responsibility.

      McClenahen, a native of Ohio now residing in Maryland, is an award-winning writer and photographer. He is the author of three books of poetry, most recently An Unexpected Poet (2013), and several books of photographs, including Black, White, and Shades of Grey (2014). He also is the author of a children’s book, Henry at His Beach (2014).

      His photograph “Provincetown: Fog Rising 2004” was selected for the Smithsonian Institution’s 2011 juried exhibition Artists at Work and displayed in the S. Dillon Ripley Center at the Smithsonian Institution in Washington, D.C., from June until October 2011. Five of his photographs are in the collection of St. Lawrence University and displayed on campus in Canton, New York.

      John McClenahen’s essay “Incorporating America: Whitman in Context” was designated one of the five best works published in The Journal of Graduate Liberal Studies during the twelve-year editorship of R. Barry Leavis of Rollins College. John McClenahen’s several journalism prizes include the coveted Jesse H. Neal Award. He also is the author of the commemorative poem “Upon 50 Years,” celebrating the fiftieth anniversary of the founding of Wolfson College Cambridge, and appearing in “The Wolfson Review.”

      John McClenahen received a B.A. (English with a minor in government) from St. Lawrence University, an M.A., (English) from Western Reserve University, and a Master of Arts in Liberal Studies from Georgetown University, where he also pursued doctoral studies. At St. Lawrence University, he was elected to academic honor societies in English and government and to Omicron Delta Kappa, the University’s highest undergraduate honor. John McClenahen was a participant in the 32nd Annual Wharton Seminars for Journalists at the Wharton School at the University of Pennsylvania in Philadelphia. During the Easter Term of the 1986 academic year, John McClenahen was the first American to hold a prestigious Press Fellowship at Wolfson College, Cambridge, in the United Kingdom.

      John McClenahen has served on the Editorial Board of Confluence: The Journal of Graduate Liberal Studies and was co-founder and first editor of Liberal Studies at Georgetown. He has been a volunteer researcher on the William Steinway Diary Project at the Smithsonian Institution, Washington, D.C., and has been an assistant professorial lecturer at The George Washington University in Washington, D.C.