A public companies guidance is the official prediction it provides about its profit or loss in the next quarter or year. It can take the form of estimates regarding revenues, costs, earnings and a general market outlook. Guidance is used by financial analysts when building their valuation models. Guidance can have a strong effect on the performance of shares after an earnings release as the company provides their view on the future outlook and helps investors to decide if they should buy, sell or hold a stock. A company is not legally required to provide guidance but many do.
As guidance can have a stronger effect on the share price performance than the quarterly results we are testing indicators on those. Forecasters are asked to provide their estimate if a company will provide a positive or negative outlook for the next quarter or year.
How we close questions on guidance:
Closing questions on guidance is not as straight-forward as closing binary questions such as “will Bitcoin trade above 6’000 USD by the end of April”, where it is clear if the event happened or not. However there are multiple ways to see if guidance is positive or negative. At times a company directly writes in their earnings reports if they guide up or down for the next quarter. Other times they will provide their estimates for specific balance sheet items and market conditions and financial analyst then conclude if it is a positive or negative outlook. You can find examples here or here. Another option to close guidance related questions is to compare aggregated future estimates on platforms such as the Wall Street Journal or others with the figures the company provides. An example of a second quarter guidance can be found here. We will mostly close the question based on the analysis provided by the financial news media after the reports are issued. Usually, there is a consensus among analysts how the results are interpreted and they release their analysis pretty quickly.
What if the company provides neutral / no guidance or guidance is unclear?
If a company does not provide guidance or there is no consensus concerning the direction, 15 points will be awarded to all forecasters who provided their opinion in order to reward the work that has been done. Please note that these questions are experimental and we might change or discard them at any given time in the future based on the results as well as the feedback that we get.