The vast majority of sell-side analysts prefer the companies they cover to provide earnings guidance. In a survey of more than 180 sell-side analysts conducted by investor relations firm Financial Relations Board, 77 percent of respondents indicated that they prefer when companies provide earnings guidance.
Other key findings of the survey include the following:
• If a company does provide guidance, 83 percent of analysts like to see guidance provided on both revenue and earnings per share
• 55 percent of analysts prefer when both quarterly and annual guidance is provided
• 69 percent of analysts feel it’s a “red flag” when a company stops providing guidance
• The most frequently cited benefit for companies that provide guidance was “Helps to better manage investor expectations” (cited by 85 percent of the analysts)
“While the practice of earnings guidance is one of the most controversial issues within the financial community today, the views of sell-side analysts have largely been absent from this debate,” says Claire Koeneman, co-president of Financial Relations Board. “The findings of our survey indicate that the vast majority of sell-side analysts are proponents of earnings guidance, which is in stark contrast to the criticism that earnings guidance has received from individuals and groups outside of the analyst community.
“In addition to helping companies better manage investor expectations, most sell-side analysts believe that earnings guidance increases the ability of companies to have meaningful dialogue with the investment community about the key drivers that will affect future financial performance.”