When Analysts Get Mad at the Companies They Follow
July 17, 2013
I always find it hilarious when I read a research report where an analyst gets mad because a company didn’t communicate to them that it was going to blow a quarter.
The company isn’t supposed to do the analyst's job. The company's role is direct analysts and investors to publicly available (hint: past) information that allows us to make our own forecast of earnings, cash flows, and ultimately intrinsic value. Under Reg FD, companies can't feed analysts anything material and non-public, or they would have to tell everyone together.
I recently read a report where an analyst bemoaned the fact that a company provided downward guidance without warning him first. I thought, "what planet is this analyst from in thinking that the company should tell investors that the company’s guidance was off?" That's surely the job of the analyst, not company management.
Great analysts get into the weeds of a company's business to figure out what is going on in the underlying market, predicting share trends, assessing product innovation, pricing, competitive plans, spending, etc. so they can be in front of a company missing or beating guidance. It’s not the job of company management to spoon feed analysts information. When analysts start getting mad that a company didn’t tell them it was going to miss, they should look in the mirror and ask themselves, what value are we adding here?
The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Information contained herein is for informational purposes only and should not be considered investment advice.
The information in this report should not be considered a recommendation to purchase or sell any particular security.
15630 0713O C