Guidance

Guidance is a company's public forecast of its own future financial performance, typically ranges for revenue, earnings per share, margins, cash flow or capital spending for the coming quarter or fiscal year. It is usually issued in the earnings press release and discussed on the earnings call.

How it works

• Form: most companies give ranges (revenue of $1.00 to $1.05 billion) rather than single points. Some guide only annually, some quarterly, and some not at all.
• Updates: companies raise, reaffirm, narrow or cut guidance each quarter. A change between scheduled reports is a preannouncement.
• Disclosure: guidance must be shared publicly, not selectively, under Regulation FD. It is usually furnished on an 8-K with the earnings release.
• Legal cover: forward-looking statements come with cautionary language that gives companies safe harbor protection under the Private Securities Litigation Reform Act.

Guidance can be GAAP or non-GAAP. Many companies guide on adjusted EPS.

Why it matters for traders

Guidance often moves a stock more than the quarter just reported, since the price reflects expected future earnings. The comparison that matters is guidance versus the consensus estimate for the next period: a midpoint above consensus is a "guide up," below is a "guide down." Watch for:

• Raised versus reaffirmed: reaffirming after a beat implicitly lowers the back half.
• Wider ranges: signal more uncertainty.
• Withdrawn guidance: usually read negatively.
• Track record: some management teams habitually guide low and beat.

Example

Harbor Freightline (ticker HRBF) guides next-quarter revenue to $480 to $500 million, a $490 million midpoint. Consensus was $510 million. The midpoint is about 3.9% below consensus ($20 million / $510 million), and analysts cut estimates the next morning.

FAQ

What does it mean when a company raises guidance?

It now expects better results than it previously forecast. The market reaction depends on whether the new range beats consensus.

Do all companies give guidance?

No. Guidance is voluntary, and some companies give little or none.