Earnings Guidance

What guidance looks like in Nordic reports

There is no standard format. The most common forms are:

• A range for one or two key figures, for example revenue growth of 2–6% and an adjusted operating margin of 12.3–13.0%. A range can be specified (narrowed) during the year as the outcome becomes clearer.
• A direction compared with the previous year: increase, decrease, or remain at the same level. Some companies use verbal scales such as “slightly” or “clearly”, and define them in the report.
• A market outlook only, describing expected demand without numbers. Some companies give no financial guidance at all.
• Medium-term targets, such as a margin to be reached in three to five years. These are financial targets rather than guidance for the year, and they are reviewed less often.

The guidance usually refers to an alternative performance measure, such as comparable-currency growth or adjusted operating profit, so the outcome is compared with that measure rather than with the IFRS figure.

Profit warnings and the Market Abuse Regulation

Under the EU Market Abuse Regulation (MAR), a listed company must disclose inside information that directly concerns it as soon as possible. If the company learns that its results will differ materially from its published guidance, or from what the market can reasonably expect, that is usually inside information. The company then publishes a stock exchange release right away, without waiting for the next report.

• A release that lowers guidance is called a profit warning; one that raises it is a positive profit warning or guidance upgrade.
• The release normally gives the new guidance and the main reasons for the change.
• Until the information is published, insiders may not trade on it.

Because of this rule, a lack of a profit warning is itself information: if a company has not changed its guidance, it believes the guidance still holds.

How to read guidance and its track record

• Compare the outcome with the last guidance, and with the first. A company that ends the year within its final range may still have started the year much higher. The worked example above shows every step for one company.
• Watch the width of the range. A wide range early in the year reflects uncertainty; narrowing it is normal, moving it is news.
• Check the measure. Guidance on adjusted figures leaves the company room to exclude items; compare the reported figures too.
• Look at the record over several years. Some management teams guide cautiously and end above their range year after year; others are often too optimistic. The table on this page counts the outcomes for each company we track, and each company page shows the details.
• Remember consensus. The share price reacts to results compared with analysts’ expectations, which can be above or below the company’s own guidance.

Guidance, consensus and the share price

Analysts who follow a company publish their own forecasts, and the average of these is the consensus. The share price usually reflects the consensus rather than the company’s guidance, so a result that is within guidance can still disappoint if analysts expected more.

When a company updates its guidance, the market compares the new range with the consensus. Raising guidance to a level the market already expected moves the share price little; keeping guidance unchanged when analysts had expected an increase can move it down. Many Nordic companies publish the consensus collected by an independent party on their investor relations pages, which makes this comparison easy.

Guidance can also be compared with the company’s own record: the table on this page shows how often each company’s results ended within, above or below its guidance.