Buffett And Dimon: No More Quarterly Profit Forecasts

Buffett And Dimon: No More Quarterly Profit Forecasts

At JPMorgan's investor day in February, he called on companies to stop providing the guidance, saying earnings are hard to predict and companies have an incentive to fudge numbers.

The billionaire investor Warren Buffett and JPMorgan Chase's CEO, Jamie Dimon, have voiced concerns that the financial markets' focus on short-term goals is hurting the economy and urged companies to move away from providing quarterly earnings guidance.

The two men noted that companies often hesitate to spend on technology, hiring, and research and development in order to meet quarterly earnings guidance that can be impacted by seasonal factors beyond their control, such as political events and even weather.

Warren Buffett and business friend Jamie Dimon argued Thursday that publicly traded businesses can damage their long-term growth and hurt their shareholders by forecasting their earnings every three months and then making short-term decisions to "make the number".

Dimon, who leads the Business Roundtable, an association of chief executive officers of leading United States companies said the move is supported by the group, added the report.

Executives often feel pressure to make quarterly forecasts, but "it can often put a company in a position where management from the CEO down feels obligated to deliver earnings and therefore may do things that they wouldn't otherwise have done", Dimon said in a rare joint interview with Buffett airing Thursday on CNBC's Squawk Box . Dimon said he could generate hundreds of millions of revenue for the bank by agreeing to some interest rate swaps.

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"I've never seen a company whose performance has improved by having some forecast out there by the CEO that we're going to earn X", Buffett said.

"Public companies should be managed for long-term prosperity, not to meet the latest forecast".

The guidance "often leads to an unhealthy focus on short-term profits at the expense of long-term strategy, growth and sustainability", the two powerful CEOs wrote in a commentary piece in the The Wall Street Journal.

Buffett and Dimon also blamed the practice for contributing to the decline in the number of public companies in the USA over the past 20 years.

The health-care venture between Berkshire Hathaway Inc., Amazon.com Inc. and JPMorgan Chase & Co. has picked the person who will lead the initiative.

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