In a previous blog post, we discussed certain high-level considerations for first-quarter 2020 earnings releases and guidance in the context of the macroeconomic uncertainty brought about by the novel coronavirus (COVID-19) pandemic. We indicated our expectation that a significant number of registrants would elect to withdraw guidance in light of this uncertainty.
To get a more comprehensive view of how registrants have approached financial guidance, we analyzed disclosures in earnings releases by off-calendar year-end companies furnished with the Securities and Exchange Commission (SEC) on or after March 16, 2020. As noted in greater detail below, a majority of companies issuing earnings releases during this period have withdrawn or suspended guidance. This post presents the results of our analysis.
At 33 earnings releases, our sample size was relatively small, but we believe this survey provides some helpful insights with respect to the approaches being taken by public companies. Our review was limited to companies that met the following criteria:
We did not include within our survey pre-releases filed by public companies outside of their regular earnings release cycle (on the premise that the inclusion of pre-releases might skew our results given the fact that companies filing pre-releases might be more likely to be among the companies that are withdrawing or suspending guidance).
Of the 33 public companies fitting the criteria above, we discovered the following results:
The companies that provided either updated guidance or new quarterly guidance generally did so with a significantly greater gap between the high and low range of their guidance compared to prior disclosures.
As part of our review, we identified the following different approaches to financial guidance disclosure that we believe worthy of mentioning:
Our survey highlights what we have been hearing from our clients—the unfolding COVID-19 pandemic and the resulting economic turmoil make it difficult to predict what the future will look like. As reflected in the survey results above, there will be many public companies that elect to suspend or withdraw guidance as a result of the tremendous economic uncertainty arising from COVID-19, but approaches will differ, and there will continue to be some public companies (albeit, potentially, a minority) that elect to continue to provide guidance during these uncertain times. Ultimately, the determination of whether to continue to provide guidance will require judgment and be very fact-specific (depending on, among other things, the industry of the public company and how COVID-19 has impacted such industry).