Elliott's Singer agrees with Buffett, Dimon on profit guidance

Jamie Dimon, Warren Buffett urge CEOs to end quarterly earnings forecasts

Jamie Dimon, Warren Buffett urge CEOs to end quarterly earnings forecasts

Buffett and Dimon announced they are partnering with Business Roundtable, a group of roughly 200 CEOs of major US companies, to call on companies to consider eliminating quarterly guidance.

Business Roundtable said it supports companies moving away from offering quarterly guidance and focusing on long-term goals.

In the latest appeal, they said companies often hesitate to spend on technology, hiring, and research and development to meet quarterly earnings forecasts that can be affected by seasonal factors beyond their control. At JPMorgan's investor day in February, he called on companies to stop providing the guidance, saying earnings are hard to predict and companies have an incentive to fudge numbers.

Dimon, is chairman of the Business Roundtable, an association of almost 200 CEOs that is also backing the push to eliminate so-called short-termism.

FILE PHOTO: Jamie Dimon, CEO of JPMorgan Chase, takes part in a panel discussion about investing in Detroit during a panel discussion at the Kennedy School of Government at Harvard University in Cambridge, Massachusetts, U.S., April 11, 2018.

Securities laws require quarterly reports on profits, revenue and other information but do not require quarterly forecasts.

Warren Buffett and business friend Jamie Dimon argued Thursday that publicly traded businesses can damage their long-term growth and hurt their shareholders by forecasting their earnings every three months and then making short-term decisions to "make the number".

It is a long-simmering debate but one that has gotten more attention in an era when activist investors are more vocal about pushing companies to deliver on their promises.

When the actual earnings results are officially reported, so-called beats - or profit results that top expectations - are often rewarded with a rise in the stock price.

But McKinsey & Co. found in a 2006 study that quarterly guidance didn't affect valuation multiples and didn't reduce share price volatility. The two business gurus said quarterly financial guidance encourages short-term thinking that stifles growth and limits innovation in the economy.

Both men said they still want companies to release detailed quarterly and annual financial data, so investors can evaluate them.