More Firms Are Refusing to Provide Earnings Guidance

Since the tech bubble burst nearly six years, regulators have declared war on research analysts. There was the global research settlement, plus new guidelines like Regulation FD.
When it comes to criticizing the Street, I take a back seat to no one. However, we’re now starting to see some unintended consequences of the anti-analyst movement. Perhaps the most troubling is that more and more companies are refusing to provide any earnings guidance whatsoever.
This week, Motorola (MOT) become the latest stock to say that it will no longer tell the public where it sees its earnings headed. Intel (INTC) said that it will no longer provide its mid-quarter sales updates. Today, only 71% of the publicly traded stocks give earnings guidance, which is down from 77% three years ago.
I really can’t blame these companies. The legal atmosphere has become toxic, and any misstep could result in legal action. As usual, an attempt for more transparency has resulted in less.
Hopefully, this will help more independent analysts, like stock bloggers, and any individual investor willing to do a little homework. There are lots of great stocks out there that almost no one knows about.
A few weeks ago, I mentioned a great little bank Northern Empire Bancshares (NREB). The company just report terrific earnings. For 2005, EPS came in at $1.59 compared with $1.23 for 2004. Not many banks are growing like that, yet not one single analyst follows the stock. There’s no guidance, no consensus, no upgrades or downgrades, just year after year of outstanding results.
Perhaps the lack of guidance isn’t as troubling as I think. The great stocks are still out there, but we may have to work a little harder to find them.

Posted by on January 21st, 2006 at 4:29 pm


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