Buffett, Dimon urge end to quarterly profit forecasts

Buffett, Dimon urge end to quarterly profit forecasts

Warren Buffett and Jamie Dimon, two of the most powerful leaders in the financial industry, have once again urged public companies to stop providing quarterly profit forecasts.

The group will likely reveal who that person is within two weeks.

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".

They argue that short-term guidance has encouraged companies to hold off on technology spending and hiring and research, and has even discouraged many private companies from going public at all.

Business Roundtable President & CEO Joshua Bolten 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 US economic growth". JPMorgan Chase reported lower fourth-quarter earnings January 12, 2018 on weak trading revenues and one-time costs from United States 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.

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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.

More than 100 million Americans invest in public companies directly or through mutual funds and millions more participate in corporate, public and union pension plans.

Dimon, in a joint interview with Buffett to CNBC, claimed that executives are often under pressure to make quarterly predictions, but the practice "can often put a company in a position where management from the CEO down feels obligated to deliver earnings and therefore may do things that they wouldn't otherwise have done", report said. About 31 percent gave annual earnings-per-share guidance.

However, companies that are in favor of issuing guidance say that it improves communications with Wall Street, lowers share price volatility and results in higher valuations.

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