Guidance

A company's own forecast for its future financial performance, typically given during earnings calls.

What Is Earnings Guidance?

Guidance is a company's own prediction for how it expects to perform in upcoming quarters or the full year. It's typically provided during the earnings call and includes projected ranges for revenue, EPS, and sometimes other metrics like operating margins or capital expenditure.

Why Guidance Often Matters More Than Results

Here's a counterintuitive truth about Wall Street: guidance is often more important than the actual earnings results. The current quarter's results are already in the past — they reflect what already happened. Guidance is about the future — and the stock market is a forward-looking machine.

A company can beat earnings by a wide margin but still see its stock drop 10%+ if it issues weak forward guidance. Conversely, a company can miss earnings but rally if it raises guidance, signaling that the miss was temporary and the business is improving.

Types of Guidance

• Raised guidance: The company expects to do better than previously forecasted. Very bullish signal.
• Maintained guidance: The company reaffirms its prior outlook. Neutral signal.
• Lowered guidance: The company expects to do worse than previously forecasted. Bearish signal.
• Withdrawn guidance: The company pulls its guidance entirely, usually due to extreme uncertainty. Very bearish signal — this happened to many companies during COVID-19.