This study examines stock price movements surrounding earnings per share (EPS) guidance announcements for U.S. companies between January 2003 and February 2015 using S&P Capital IQ’s Estimates database. There is a perception that management uses guidance to ‘walk down’ market expectations so that the company can beat analysts’ consensus estimates when earnings are eventually released. Companies that experienced positive guidance news, i.e. those that announced guidance higher than consensus estimates or previous guidance, yielded positive excess returns. We explore practical ways in which investors may benefit from annual and quarterly guidance information.

This report is a continuation of our work in the area of event driven investing, a class of strategies that originate from company specific events.

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