Investors are always looking forward, discounting what’s going to happen in the future to the present. That’s why more attention is paid to forward guidance, which is typically provided during an earnings call by management. 

Executives try to softly guide analysts and investors to where they expect earnings will be in the next quarter and year through internal projections for revenue, earnings, and capital spending. Two important things to keep in mind: Firstly, this number is subject to revision in the interim. Secondly, it’s not unheard of for company executives to soft-pedal guidance with the view of decreasing the chances that they will miss their own estimates and increasing the chances of a big beat. 

You won’t find forward guidance in our earnings report, as this can be quite cumbersome to track and not all companies provide it anyway. 

Forward guidance is so important that sometimes even if a company misses earnings expectations, its shares can rally if the guidance was good, meaning that a company expects itself to do better in the future. Conversely, the stock price of company beating earnings expectations can fall if it issues unexpectedly negative forward guidance.