Buffett, Dimon urge end to quarterly profit forecasts

Buffett Dimon make plea to halt quarterly guidance so management can think long-term

So they should stop the forecasting, the two men said.

This combo of file photos shows Warren Buffett attending the Forbes 100th Anniversary Gala in New York on September 19, 2017, left, and JP Morgan Chase Chairman and CEO Jamie Dimon on the floor of the New York Stock Exchange on July 12, 2013.

Dimon, chairman of the Business Roundtable, noted that the group of CEOs also support companies moving away from the practice and instead, focus on long-term value creation.

"I have seen managements. get tempted by the predictions that they've made", Buffett said.

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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. JPMorgan Chase reported lower fourth-quarter earnings January 12, 2018 on weak trading revenues and one-time costs from USA tax reform, partly offset by gains from higher interest rates.Net income for the quarter ending December 31 was $4.2 billion, down 37 percent from the year-ago period.

Several big companies like AT&T, Coca Cola, Facebook and UPS have stopped issuing quarterly earnings guidance.

A less compelling argument is that corporate EPS guidance more or less anchors analysts' EPS estimates.

But Buffett says the practice of CEOs providing a heads-up on how earnings-per-share results are shaping up often causes them to make poor decisions to ensure that the company beats or meets the results they've communicated to Wall Street. They offered "common-sense" recommendations for public companies to improve governance and relations with shareholders. Public companies owe it to all of them to get this right, they said. An outsized emphasis on quarterly earnings per share projections undermines the importance of investments in infrastructure, workforce development and other crucial capital expenditures that drive sustained USA economic growth. Companies including Unilever NV, Facebook Inc., GlaxoSmithKline Plc and BP Plc have scrapped the practice in favor of multi-year outlooks, according to the report.

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