Moving Beyond Quarterly Guidance - A relic of the Past

FCLT Global / October 2017
KKS collaborators - Sakis Kotsantonis and George Serafeim

Since 2005, research has consistently found that the vast majority of corporate executives think that short-term pressure is growing, that it is changing their business decisions and that those changes are destroying value. One effective way that corporations are combatting this phenomena is by moving away from quarterly earnings per share (EPS) guidance and instead providing investors with a long-term roadmap focused on the fundamental economic drivers of the business tied to management's outlook on critical key performance indicators.

For the purpose of this report KKS Advisors conducted research for FCLT Global on guidance policies for 799 firms from the S&P 500 and Euro Stoxx 300 for the period 2010 to 2016. Our results highlight the decrease in the percentage of S&P 500 and Euro Stoxx 300 firms that offer quarterly EPS Guidance.

Long-term investors do not need a lot of detailed guidance about quarterly numbers. They need clarity, consistency and transparency from managers in communicating strategic priorities and their long-term expectations. FCLT Global recommends a long-term roadmap as the new normal for investor communications to replace quarterly EPS Guidance.