Elliott's Singer agrees with Buffett, Dimon on profit guidance

Saturday, 09 Jun, 2018

Although we've seen no immediate opposition to the proposed elimination of quarterly EPS guidance, it's not hard to imagine what at least one argument might be: just because companies don't publish the number does not mean they won't calculate such a number.

"Quarterly earnings guidance often leads to an unhealthy focus on short-term profits at the expense of long-term strategy, growth and sustainability", they said in the op-ed. "Public guidance was the fix for many companies".

Companies often hold back spending on technology, hiring and research and development to meet quarterly earnings guidance that may be affected by factors outside the company's control, they wrote.

Investor Warren Buffett gestures on stage during a conversation with CNBC's Becky Quick, at a national conference sponsored by the Purpose Built Communities group that Buffett supports, in Omaha, Neb., Tuesday, Oct. 3, 2017, Buffett discussed what philanthropy can do to help fight poverty.

"When companies get where they're sort of living by so-called 'making the numbers, ' they do a lot of things that really are counter to the long-term interests of the business", Buffett said.

In the interview, the two businessmen were asked who hated bitcoin the most and Buffet started off by saying jokey: "I set a high a high standard, I don't know whether Jamie can top me or not".

Dimon has blasted excessive reporting requirements and the short-term focus of quarterly earnings.

Proponents of the practice say it improves communications with investors and ultimately results in fewer, not more, wild swings in stock prices.

Several big companies like AT&T, Coca Cola, Facebook and UPS have stopped issuing quarterly earnings guidance.

Dimon, Buffett and BlackRock Inc.'s Laurence D. Fink urged companies in 2016 to refrain from short-term earnings forecasts in a letter and report with other financial industry executives. While the companies didn't give much detail at the time, the announcement prompted broad speculation and unease among investors, sending shares lower for health-system companies including insurers and pharmacy-benefit managers.