DaytonDailyNews.com

DAYTON — Companies including, Coca-Cola Co. and NCR Corp., have quit giving quarterly projections of their future earnings-per-share expectations. Coke, in fact, quit giving such guidance entirely.

Managements which have gone this route say it frees them to concentrate on developing and implementing long-term strategies, rather than focusing on hitting short-term financial targets to avoid angering shareholders — who sometimes file lawsuits if earnings fall short of corporate forecasts.

Corporations will be reporting their latest quarterly earnings within the next few weeks, and some will provide specific ranges of projected earnings per share for upcoming quarters. The companies which don't may deprive investors of one source of information about whether to buy a company's stock. But some experts question whether that information is truly reliable.

"I think you can be suspicious of a company that's trying to hit its target," said Tom Mangan, a senior vice president of James Investment Research Inc. of suburban Dayton. "Where did the extra value come from? Are they going to be a negative in terms of a future earnings statement?"

James Investment assesses companies by examining the performance of the overall industry they are in, what is happening in the economy, and whether there is reason to have confidence in a company's senior management, Mangan said. Corporate performances can be affected by external factors, such as fluctuations in costs of oil or raw materials.

Sales figures can be a more reliable indicator for a company than earnings, which may be more easily manipulated through bookkeeping gimmicks, said Nicolas Gressis, a Wright State University finance professor.

Demand from investors and analysts is a key motivator for companies which continue to regularly issue specific earnings guidance, according to executives surveyed worldwide for a McKinsey & Company study released in March.

In a separate survey of more than 400 executives, 80 percent said they would reduce discretionary spending on research and development, advertising, maintenance or hiring in order to meet short-term earnings targets.

Warren Buffett, chief executive officer of Berkshire Hathaway Inc., urged corporate managements in 2000 to focus on long-term strategy, not short-term earnings. Companies in which Berkshire Hathaway held investments — including Coke, Gillette Co. and The Washington Post Co. — subsequently stopped providing quarterly earnings guidance in favor of annual projections, the CFA Centre for Financial Market Integrity and the Business Roundtable Institute for Corporate Ethics noted in a joint report this year. The organizations jointly recommended that corporate executives, investors and analysts reconsider the benefits of providing and relying upon quarterly earnings guidance.

Companies could help by providing more meaningful, and perhaps more frequent, communications about long-term strategies, the organizations said.

Company positions on earnings guidance

NCR Corp., in January, announced its decision to provide earnings guidance on an annual basis, rather than quarterly as it had done. The company provides a range of specific per-share earnings projections. NCR management said it believed that annual improvement is the most meaningful measure of a company's long-term improvement.

Coca-Cola Co., at the end of 2002, said it had decided to no longer furnish either quarterly or annual earnings per share guidance. Coke said it would instead provide information about strategic initiatives and factors that affect its business and operating environment.

DPL Inc., owner of Dayton Power and Light Co., provides annual forecasts with a specific range of per-share earnings projections.

Standard Register Co. gives annual guidance, but not specific statistical expectations.

Illinois Tool Works Inc., owner of Troy-based Hobart Corp., gives quarterly guidance within specified ranges.