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Dramatic market movements make the theoretical crystal balls much more valuable. Sadly, for US corporate investors, the next best thing – regular guidance from company executives on the short-term path to profit – has become more elusive. Huge retailers Walmart and Delta Air Lines retreated from forecasts on Wednesday. The obvious reason is the whimsical tariff announcement from the White House.
It’s not difficult to see where these companies are coming from. Volatility is extreme. Walmart stocks fell 10% in 2025, with nearly everyone planning tariffs coming back, leading to the point where the stock rebounded. Delta stocks fell 40%. The complex planning companies were made to become shareholder-friendly and suddenly became a useless movement.
Revenue guidance is a curious phenomenon, but it is understandable that open market investors prefer it. Predictability makes the model more accurate. With regard to “future-looking statements,” companies have built elaborate investor relations functions on keeping mutual fund investors happy, while complying with US securities laws.
Companies that provide revenue guidance should intuitively have a capital advantage. Delta, a rarity, discloses the weighted average cost of capital for companies, peging at just 8%. One factor in this figure is the “beta,” which measures the degree to which a company’s stock is compared to the wider market. The other is the risk premium that investors demand to hold assets that are not government bonds. Transparency should reduce these numbers.
At the same time, guidance can be a distraction for managers. Recent academic studies have looked at companies that have stopped existing policies that share revenue forecasts when the pandemic hit. Those who chose not to resume practice later “suggested that they were powerful performers who achieved positive and unusual returns and were previously prevented from halting guidance by anticipated market penalties.”
Some companies maintain their courses. Lakeland Industries, a small listed manufacturer of dangerous goods suits and firefighter uniforms with a factory in Vietnam, stuck to its economic expectations after US President Donald Trump returned to his tariff plans. “So we’re one tweet from the 46% tariff,” CEO Jim Jenkins shrugged on a call with an analyst on Wednesday afternoon. “I think at this point we think we’re stuck with the guidance we’re currently.”
Trump’s volatile policies will undoubtedly lead other companies to halt sharing forecasts. The gap between the analyst model and the actual results expands. That’s true: the idea that outsiders can accurately predict the revenue of billions of dollar companies is already somewhat strange. Analysts need to go back to doing their job and make mistakes more often.
sujeet.indap@ft.com
