What is guidance?

Guidance: What a company itself says it expects for the coming period. Markets often react more to this than to last quarter's results.

With their quarterly results many companies also say what they expect for the coming months or year. That is called guidance. It is often about revenue, profit or margins.

Investors mainly look ahead. That is why a share price can fall after good results if the company lowers its outlook. The other way round, a price can rise after weak results if the outlook goes up.

Guidance is not a promise. It is the company's own estimate, and it can be changed later.

Example
A company first expected 2.0 billion euros in revenue for the year. With its quarterly results it lowers that to 1.8 billion euros. That is 10 percent less than first thought, even though the last quarter was good.

Watch out
Companies can make their outlook cautious or rosy on purpose. It remains an estimate, not a fact.

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