Providing Earnings Guidance

The morning blog published by the CFO Journal of The Wall Street Journal last week opened with a mention of Alex Edmans, Professor of Finance at London Business School, and his advice to companies on Five Ways CFOs Can Focus on the Long Term. One of the ways Edmans described is to avoid providing earnings guidance, which is quoted below. “Avoid Providing Earnings Guidance. Providing guidance on likely quarterly earnings numbers increases transparency, but also means that the market holds firms accountable to their forecasts. Thus, companies will focus on meeting short-term targets, rather than pursuing long-term value,” Alex Edmans. Promoting a short-term view by providing earnings guidance is an unintended consequence of the Fair Disclosure Act of 2000, in my opinion. I also believe we have come a long way in the last fifteen years under the watchful eye of FD. Many corporations have learned how to provide guidance […] Read more »

Earnings Quiet Period

My professional organization, National Investor Relations Institute (NIRI), hosted a webinar about Quiet Period practices on May 20, 2015. I joined two other experienced investor relations professionals to comprise the panel of speakers for the webinar.   The archive is accessible on www.niri.org by members only. The following are my webinar speaking notes for people who do not have access. I am a proponent of quiet periods prior to the release of earnings. It minimizes the risk for misinterpretation and the spread of rumors and/or speculation prior to an earnings announcement.   All of which can cause stock volatility and a distraction while preparing for the actual release of earnings and conference call. This is particularly a risk for companies offering “earnings guidance” or management outlook on future earnings. The quiet period for the release of earnings is not well defined. Stock offerings such as an initial public offering by new issuers […] Read more »

Communicate Without Breaking Your Stride – 3

This is the last of a three-part series about communicating with institutional investors.  Because management accessibility is important to buy and sell decisions, it is highly beneficial to carve out time from running the business to meet with existing and prospective institutional shareholders.  The following offers practical tips for achieving the most from the time you spend with investors while increasing the ease in which you can move from one responsibility to the other without breaking your stride. Make the Time – Decide what percentage of your time you want to dedicate to meeting with the investment community and identify dates of availability before the new fiscal year begins.  Incorporate the dates into your fiscal calendar along with quiet periods, board meetings, company reviews, operational meetings, etc. Advance planning will help prevent scrambling to find an open date when a request for a meeting or conference occurs while helping you […] Read more »

Communicate Without Breaking Your Stride — 2

This is the second in a series of three articles about communicating with institutional investors.  Your shareholder base will change as your company’s investment characteristics change.  Understanding the powerful influence of investment styles will help you anticipate shifts in institutional ownership and modify IR activities to maintain access to the equity market on the best possible terms. The following diagram reflects four broad investment styles.  There are subsectors to each and a couple of hybrids which will be discussed later. It is much easier to manage expectations about your financial performance when the mix of investment styles of your institutional shareholders are aligned with the investment characteristics of your company and its future growth prospects.  Messaging, time allocation and targeting promote an appropriate mix of institutional shareholders. The Growth quadrant includes aggressive growth, core growth and growth investment styles.  Funds managed for growth are seeking stocks of companies expected to […] Read more »

Hurdles or High Jumps

Many perceived barriers of communication between executive management and institutional investors are avoidable.  Communicate Without Breaking Your Stride is a series of articles intended to help you overcome barriers of communications.  The information is based upon my observations and experiences during more than thirty years in investor relations. Both hurdle and high jump athletes overcome barriers to become the best in their individual fields of endeavor.  The hurdler leaps over barriers without breaking stride.  The high jump athlete turns away from the barrier in order to flop over it.  Why flop when you can leap over barriers again and again without breaking your stride. My goal in developing the following three articles is to help you accelerate the ease in which you can answer questions and address concerns without becoming distracted or breaking away from the continuity of your investment messages. The Hierarchy – Comparison of four financial audiences and […] Read more »