guidance

play
noun guid·ance \ˈgī-dən(t)s\
Updated on: 26 Jul 2017

Definition of guidance

  1. 1 :  the act or process of guiding

  2. 2a :  the direction provided by a guide couldn't have done it without her guidanceb :  advice on vocational or educational problems given to students provides guidance on how to apply for scholarships

  3. 3 :  the process of controlling the course of a projectile by a built-in mechanism problems with the missile's guidance

Examples of guidance in a Sentence

  1. I couldn't have done it without her guidance.

  2. We need more guidance on how to handle these unusual cases.

Recent Examples of guidance from the Web

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'guidance.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

Origin and Etymology of guidance

see 1guide


Financial Definition of GUIDANCE

guidance

What It Is

In the stock world, guidance refers to public communication from a company regarding earnings expectations.

How It Works

The world of earnings guidance is large and fluid, whereby the management of publicly traded companies issue public estimates about what they expect earnings to be for the coming quarter. Guidance is based on management's experience, calculations and outlook, and it significantly influences the analysts covering the stock, because the analysts incorporate the information into their own research and earnings forecasts for their clients.

Before August 2000, it was legal for public companies to provide guidance to chosen analysts rather than publicly disclose their guidance. The SEC's adoption of Regulation FD in August 2000 prohibited this selective disclosure of material nonpublic information, and public companies must now publicly disseminate guidance and earnings estimates to analysts all at the same time.

When management becomes aware that the company probably will not meet the expectations it previously communicated, the company typically issues a profit warning via press release or conference call with analysts several weeks before announcing quarterly earnings.

Why It Matters

Guidance considerably influences stock prices because it helps investors evaluate a stock's potential. If investors expect a company to report, say, $0.10 in earnings per share next quarter, but the company actually reports $0.08, many investors might sell the stock and the company's stock price will therefore probably fall after the announcement. Conversely, if the company reports $0.12, the stock price will probably rise. The degree of "miss" or "surprise" influences how much the stock price will change. This is why guidance is usually a company's attempt to "soften the blow" or “fluff the pillows” before announcing earnings.

Some companies do not give guidance. They usually make that choice to reduce legal liability in the event that management's estimates are wrong. Some analysts claim that companies that do not offer any guidance often receive a "break" on stock price changes when these companies miss earnings, because the market is aware that the company's management has given the analysts (and their resulting estimates) no input.



GUIDANCE Defined for English Language Learners

guidance

play
noun

Definition of guidance for English Language Learners

  • : help or advice that tells you what to do : the act or process of guiding someone or something

  • : the process of controlling the flight of something (such as a missile)


GUIDANCE Defined for Kids

guidance

play
noun guid·ance \ˈgī-dəns\

Definition of guidance for Students

  1. :  help, instruction, or assistance I fumbled for my cross and was about to pray for guidance … — Avi, Crispin



Seen and Heard

What made you want to look up guidance? Please tell us where you read or heard it (including the quote, if possible).

Love words? Need even more definitions?

Subscribe to America's largest dictionary and get thousands more definitions and advanced search—ad free!

WORD OF THE DAY

conspicuously offensive

Get Word of the Day daily email!

Test Your Vocabulary

Time Traveler Quiz: Which Word Came First?

  • time-traveler-quiz-which-word-came-first
  • Which came first?
How Strong Is Your Vocabulary?

Test your vocabulary with our 10-question quiz!

TAKE THE QUIZ
SCRABBLE® Sprint

Test Your Knowledge - and learn some interesting things along the way.

TAKE THE QUIZ

Love words? Need even more definitions?

Subscribe to America's largest dictionary and get thousands more definitions and advanced search—ad free!