2021 Guidance
We kick off our first thought leadership publication of 2021 with everyone’s favorite topic and one that has been a recurring pain point since the start of the pandemic – guidance – in which we will provide our proprietary research and considerations based on surveys comprising:
- 80 investors and analysts globally, comprising 69% buy side and 31% sell side, with EAUM totaling ~$2.6 trillion
- 77 IROs across all market caps and sectors
More than 75% Expect Companies that Historically Gave Guidance to Reinstate Outlooks
At the onset of COVID-19 and throughout 2020, investors were very understanding of companies that withdrew and did not reinstate guidance given the continued uncertainties. However, in our most recent Inside the Buy-side® Earnings Primer™ survey, the majority of investors expect companies to return to historical guidance practices and reinstate outlooks.
Despite the year-end spike in COVID-19 cases and uncertainties about both vaccine timing and individuals’ willingness to be vaccinated – the #1 concern identified this survey – 77% agree companies that historically provided guidance should return to this practice. Still, the majority caveat that this may be challenging for some companies and, as one investor aptly summed up general sentiment, “I would rather have no guidance than guidance that is not based on a 90% confidence level that it will be achieved.”
Investors Indicate They Will Understand if a Company Does Not Give Guidance but Give Priority to Those That Do
A total of 82% note they will understand if a company that historically gave guidance elects not to for 2021, as long as “there is clear rationale.” Still, a combined 52% note they will view those that issue outlooks more favorably.
In the Absence of Annual Outlooks, Investors Look for Robust Qualitative Color – Not Quarterly Guidance
In lieu of annual guidance, investors have a strong appetite for more color. The majority request additional qualitative guidance, including “other KPIs” and end market trends and nearly half favor more robust commentary than the company provides in a normal year. While investors expect those that historically gave quarterly guidance to continue doing so, few are seeking companies that aren’t comfortable giving annual guidance to revert to providing quarterly instead.
IROs Align with Investors that in the Absence of Annual Guidance, Qualitative Color is the Way to Go
In line with investor expectations, nearly two-thirds of IROs that will not give annual guidance plan to give more qualitative guidance/trends, while fewer than 20% report their companies will issue quarterly guidance.
Revenue and EPS the Most Commonly Preferred Guidance Metrics
More than half of companies that are giving guidance will provide revenue and EPS (in line with our historical research) and, to a much lesser extent, EBITDA, organic growth and FCF. If you’d like sector-specific data, we are happy to provide.
Verbatim IRO Commentary
- “2021 is still TBD.”
- “Still TBD.”
- “We are still evaluating guidance protocol for 2021.”
- “A decision has not been made.”
- “Still unsure if we will give guidance.”
- “We are still evaluating.”
- “No sense in giving guidance until we see more stability in our end customers’ environment from COVID impacts.”
- “We may not give formal quarterly guidance and instead provide more robust color on Q1.”
- “We don’t give guidance but do articulate a minimum ROIC of 20% on new developments.”
- “We don’t give guidance but have provided five-year goals.”
- “Unlikely to reinstate annual guidance in Q1 2021 but may wait until Q2.”
- “We may give an outlook for Q1 (less inclusive and specific than guidance) and then in Q2 restore full-year guidance, if the uncertainty is lower than at present.”
- “We will likely hold off on guiding till the March quarter is completed.”
- “Prior to COVID, we provided full-year guidance and a framework for next quarter (Organic Rev and Margin); unsure for 2021 at current moment; leaning toward waiting to reinstate until variables stabilize; would provide qualitative color and scenarios for the year along with next quarter framework (similar to COVID approach).”
- “Goal is to focus more long-term with annual guidance; some quarterly color on guidance.”
- “It is my expectation that we will provide annual guidance but it is not 100% agreed on internally.”
- “At a high level, we will provide annual total revenue guidance; however, we will provide linked quarter guidance on net interest margin and net interest income.”
- “We have not made a decision regarding guidance but believe both quarterly and annual is more likely. I suspect it will include EPS guidance for the next quarter and several key items for the full year but not EPS.”
- “We haven’t finalized guidance for YE20 reporting but we anticipate going back to our pre-COVID practices.”
- “Unlikely to reinstate annual guidance in Q1 2021 but may wait until Q2.”
- “I expect we will revert to providing annual guidance but it is not agreed on.”
- “Select quarterly info.”
- “We have not finalized plans but if we provide any guidance in 2021, it will likely be quarterly due to remaining global uncertainty.”
- “We haven’t firmly decided yet on 2021 plan. Likely to be quarterly.”
- “Our fiscal runs May-April, so we will likely resume annual guide on our Q4 call.”
- “We have not yet decided but we are halfway through our year and may choose to reinstate.”
In Closing
Leverage Guidance to Take Charge of Your IR Story
Based on interviews with more than 15,000 investors, our research maintains expectations management is the X Factor in shareholder value creation, in that best-in-class management teams consistently demonstrate an ability to control the narrative and under promise and over deliver.
Leveraging deep research-based insights and experience, we have extensive expertise in guidance setting and strategy, as well as a track record in helping companies effectively manage expectations. While investors will be understanding of companies with significant uncertainty and a clear rationale for not providing guidance, the broad-based view and our channel checks reveal the expectation is that companies will return to historical practices and we’re here for you – as a sounding board, advisor and investor communications expert.
As always, we hope you find our primary research, data, insights, and best practices helpful.