US companies issuing outlooks for the fourth quarter of 2007 have been decidedly negative this year. In a market that now scrutinizes all aspects of a company's financial report, we find it useful to compare this year's negativity to last year. Last year negative outlooks were three times more common than positive. We attribute the negativity to today's market rather than a slowing economy or deteriorating corporate earnings. By issuing "safe guidance" companies are more likely to beat their own numbers and also hopefully the estimates, thus supplying traders with a "beat" over the dreaded "miss."
Looking deeper into Birinyi Associates' earnings database, we find that the net (higher guidance minus lower guidance) number has been mostly neutral, with negativity not unusual. More interestingly however, we find that the net earnings reports (beats minus misses) have been decidedly positive throughout the bull market.
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