Earnings Guidance
Earnings guidance is a company's own forecast of its expected future results, such as revenue or earnings per share, for an upcoming period.
Guidance, also called an outlook or forecast, is what company management tells investors about its expected performance. It is often given as a range, for example expected revenue between $4.0 billion and $4.2 billion for the next quarter, or expected earnings per share of $5.10 to $5.30 for the full year.
Companies usually issue or update guidance alongside their quarterly earnings reports. Raising guidance signals that business is going better than expected, while lowering it, sometimes called a guidance cut, signals the opposite. Because stock prices are based on future expectations, a change in guidance can move a stock more than the quarter's actual results.
Not every company gives guidance. Some prefer not to, arguing it encourages short-term thinking, and the level of detail varies. Guidance is not a promise. It reflects management's view at a point in time and can be affected by the economy, competition and other factors. US securities law provides some protection for forward-looking statements accompanied by cautionary language.
Example: a company reports results in line with expectations but lowers its full-year EPS guidance by 10%. Its stock falls despite the solid quarter.