Buffett And Dimon: No More Quarterly Profit Forecasts

Bad Advice       Quarterly guidance has resulted in bigger earnings surprises since 2016              Source Bloomberg

Dimon, in a joint interview with Buffett to CNBC, claimed that executives are often under pressure to make quarterly predictions, but the practice "can often put a company in a position where management from the CEO down feels obligated to deliver earnings and therefore may do things that they wouldn't otherwise have done", report said.

Buffett, who is chairman of Berkshire Hathaway Inc (BRKa.N), and Dimon wrote in a Wall Street Journal column on Thursday that the pressure to meet short-term estimates has contributed to a fall in the number of USA public companies.

Dimon, who appeared in a joint CNBC interview with Berkshire Hathaway chief executive and billionaire business magnate Warren Buffett, has in the past been very sceptical of the crypto, labelling it a "fraud" in September a year ago. "Public guidance was the fix for many companies".

Two of Wall Street's harshest bitcoin critics are once again warning investors of the dangers of bitcoin. Missing "the number" can often result in big, short-term stock moves.

Buffett defended his argument in an interview with CNBC on Thursday morning.

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Buffett and Dimon helped produce a set of voluntary governance guidelines two years ago, which was signed by more than one dozen executives.

"Reducing or even eliminating quarterly earnings guidance won't, by itself, eliminate all short-term performance pressures that US public companies now face, but it would be a step in the right direction", Dimon and Buffett wrote.

"I have seen managements. get tempted by the predictions that they've made", Buffett said.

But McKinsey & Co. found in a 2006 study that quarterly guidance didn't affect valuation multiples and didn't reduce share price volatility. "We are encouraging all public companies to consider moving away from providing quarterly earnings-per-share guidance".

Quarterly results are influenced by the weather, commodity prices and other factors beyond the control of CEOs, Dimon said. Public companies owe it to all of them to get this right, they said. But, he added, taking a stand on the issue is "a first step".

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