Industrial Investors Brace for Disappointing 2H24 amid Anticipated Misses and Downward Guidance Revisions; Sights Turn to 2025 for Which Optimism is Building
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Q3'24 Inside The Buy-Side® Earnings Primer®
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Survey Finds Notable Sentiment Divergence Resulting in Bull-Bear Barbell; Outright Bearishness at Highest Level in 12 Months with More Downward Guidance Revisions Expected
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What can we learn from 2023 guidance practices as we enter 2024?
To garner insights into the latest trends, we analyzed the guidance practices of the S&P 500.
Key Findings:
- Practice: Among the S&P 500, a substantial 68% of companies provide some form of quantitative guidance, encompassing Revenue, EPS, EBITDA, Capex, and/or FCF.
- Cadence: Notably, two-thirds of this cohort issue annual guidance only, while 10% and 23% provide quarterly only or both, respectively.
- Leading Metrics: Revenue and EPS are the leading guidance metrics provided on both an annual and quarterly basis, while Capex and FCF are the most commonly issued on an annual-only basis. The sectors with the most quarterly-only guidance issuers are Tech and Consumer Discretionary.
- Evolution of Guidance Spreads: When looking at pre- and post-pandemic guidance setting (2018 – 2023), we confirm that spreads are widening, largely to account for increased uncertainty and smarter expectations management.
- EPS Guidance: The average annual EPS guidance spread has widened in recent years, escalating from $0.23 in 2018 to a substantial $0.41 in 2023.
- Revenue Guidance: Average top-line spreads, while also increasing over the same 5-year timeframe, widened 0.3% and have held steady over the past three years.
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