Guidance
Guidance is management's forecast for next quarter's or the full year's revenue, margins, EPS and similar metrics, usually given as a range. It is one of the parts of an earnings report that moves the stock the most.
How to read it
Compare the midpoint of the guidance range with the analyst consensus for the same period. Above consensus is a guidance raise or better-than-expected guidance; below is the opposite.
Check management's track record. Some companies habitually guide conservatively and then beat; others regularly fall short of their own guidance. The historical hit rate tells you how much to discount the latest guidance.
Changes to full-year guidance matter more than changes to a single quarter. Raising the full-year outlook partway through the fiscal year usually means management feels confident about the quarters still ahead.
Common pitfalls
- Not every company gives guidance. Many banks, utilities and some large tech companies provide no specific numbers and only describe the outlook qualitatively on the conference call.
- Guidance is a forecast, not a promise. Companies withdraw or cut it when the macro environment changes.
On FinDog
The "Guidance Tracker" section of each earnings analysis page sets the latest guidance alongside past guidance and marks whether each earlier target was ultimately met. The Decision Panel on each stock page shows how many times guidance was met and the average deviation.
Read the latest analyses →Related terms
- Consensus EstimateThe consensus estimate is the average (or median) of the forecasts that sell-side analysts covering a company have made for metrics such as revenue and EPS. The market uses it as the baseline for deciding whether a report was "good."
- Earnings Beat / MissWhen reported revenue or EPS comes in above the consensus estimate it is a beat; below is a miss; roughly equal is in line. The difference expressed as a percentage of the estimate is called the surprise.
- MD&AMD&A is a standard section of the 10-Q and 10-K in which management explains in words why the period's results changed: which businesses grew, which costs rose, how cash flow and capital spending are being managed, and what risks it sees.