Published: Sat, June 09, 2018
Medical | By Marta Holmes

Jamie Dimon, Warren Buffett urge CEOs to end quarterly earnings forecasts

Jamie Dimon, Warren Buffett urge CEOs to end quarterly earnings forecasts

Warren Buffett and Jamie Dimon have teamed up to once again call for the end to quarterly earnings guidance by companies.

"Quarterly earnings guidance often leads to an unhealthy focus on short-term profits at the expense of long-term strategy, growth and sustainability", they said.

Companies often hold back spending on technology, hiring, and research and development to meet quarterly earnings guidance that may be affected by factors outside the company's control, the business leaders wrote.

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Buffett and Dimon announced they are partnering with Business Roundtable, a group of roughly 200 CEOs of major US companies, to call on companies to consider eliminating quarterly guidance.

"The three of us and the new CEO, we've basically reached agreement", Berkshire Chief Executive Officer Warren Buffett said Thursday in an interview with CNBC, without naming the individual.

Despite the short-term hit to results from the tax bill, chief executive Jamie Dimon hailed the measure as a boon for the U.S. economy."US companies will be more competitive globally, which will ultimately benefit all Americans", Dimon said in a news release.

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"When companies get where they're sort of living by so-called making the numbers, they do a lot of things that really are counter to the long-term interests of the business", he said.

It is a long-simmering debate but one that has gotten more attention in an era when activist investors are more vocal about pushing companies to deliver on their promises. The two business gurus said quarterly financial guidance encourages short-term thinking that stifles growth and limits innovation in the economy.

However, those favouring the practice vouch that it improves communications with Wall Street, reduces share price volatility and boosts a stock's value, the report said.

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Buffett and Dimon said they were not opposed to the practice of quarterly and annual reporting that ensures transparency. While the companies didn't give much detail at the time, the announcement prompted broad speculation and unease among investors, sending shares lower for health-system companies including insurers and pharmacy-benefit managers.

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