This is The Takeaway from today’s Morning Brief, which you can sign up to receive in your inbox every morning along with:
“Every day is a march toward the next quarterly earnings report.”
That comment came to me compliments of a public company CEO a few weeks ago over coffee. It certainly jibes with what I’ve heard through the years from investor relations leads, CFOs, and CEOs.
These keepers of the numbers have told me they are beholden to the market and its whims, and they spend insane amounts of time crafting earnings call narratives and plotting out guidance ranges.
It all seems so silly, seeing as it’s not required to issue guidance at all!
And this brings me to today’s thoughts.
Now could be a good time for execs to use the cover of Trump tariff uncertainty to stop providing guidance of any kind, once and for all.
After all, how can one believe any outstanding numbers in this environment (and environments three and a half years from now) when it could literally change with one Truth Social post?
Delta (DAL) CEO Ed Bastian caught a clue this week and yanked guidance.
Levi’s (LEVI) CEO Michelle Gass rolled the dice and let the company’s outstanding full-year profit guidance ride.
I found it bizarre, given Levi’s stands to get hammered by tariffs due to its origin of sourcing. Shortly before Trump’s 90-day tariff pause, one former apparel CEO told me by text the price of a pair of jeans could go up 50% to 100%. But the pause didn’t include China, which now has a rate of 145%.
But hey, at least Gass has formed an internal “task force” to begin figuring out the tariff impact on the business.
Walmart (WMT) CEO Doug McMillon and CFO John David Rainey met investors in the middle. The company warned on operating profits for the first quarter but left its full-year range unchanged.
“I suspended guidance once in my six years and that was during COVID,” former Hostess Brands CEO Andy Callahan told me.
He added, “CEOs/CFOs do a lot of work to understand the forecast and do sensitivities to those inputs to determine a RELIABLE RANGE of outcomes. When two things happen at once like is happening now … ie a large range of uncertainty or short time to solve, they will suspend. The level of impact happening now is uncertain and likely outside range of CEOs to solve. They will likely suspend for at least a quarter. Guidance is not required and an uncertain or inaccurate guide is worse than a very rational suspension. And saying it does not include the impacts and keeping the guide is disingenuous.”
CEOs tell me a lot of companies are likely to remove guidance when earnings season begins next week. It feels like the right move, even if it hits the company’s stock price. That means investors will have to assess companies differently — think more textbook-like than trying to predict an earnings number and subsequent stock reaction.
I am curious, though: How much historically do you rely on sales and profit guidance from a company you own? And if you do rely heavily on that guidance, are you doing so now, given any outstanding forecasts are bordering on useless because of tariff uncertainty? I am eager to hear your thoughts — drop me a line on X @BrianSozzi.
Full disclosure: I have for years disliked corporate guidance and have been steadfast in saying the practice should be stopped.
Time to say bye-bye to analyst forecasts and whipsawing stock prices in the seconds after the earnings result hits the tape!
I think a company’s investment worthiness should be dictated by the pure health of the business, not by how an investment bank thinks a business should be doing based on their various spreadsheet inputs.
The pure health of the business could be assessed by scrutinizing sequential sales, margins, profits, and cash flow growth rates on an absolute and relative basis (being simplistic here, but it can be done this way at the bare minimum).
Nevertheless, here is what some top former public company CEOs told me about offering profit guidance during times of considerable economic and policy uncertainty, as is presently the case.
Former Cisco CEO John Chambers
“General guidelines I follow in times of uncertainty are to err on the side of transparency and openness even if that requires a wider range in the guidance, with appropriate disclaimers, given the market conditions.”
Boston Consulting Group chair Rich Lesser
“We believe a pause in point estimates of forward guidance is justified for the most impacted industries with the widest outcomes. This should come with:
Color on moving parts (e.g., tariffs, pricing, elasticity, supply chain moves, productivity & savings to ease pressure, ability to monetize/sell assets) to help investors and analysts model scenarios.
A commitment to share as much as possible as soon as possible (ideally weeks not months).
A commitment to get back to formal guidance in the short-to-medium term when the situation has clarified/stabilized a bit.”
Former Medtronic CEO Bill George
“We have discussed this question with CEOs recently.
Given the uncertainty created by constantly changing tariffs and their unknown impact on the economy and on supply chains, I believe it is wise to withhold guidance on near-term revenues and earnings. This situation is similar to what CEOs experienced with COVID in 2020.”
Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
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