Guidance

When a company reports its latest results, management usually pairs the historical numbers with guidance: what they expect the business to earn or generate in the period ahead. This forward estimate often moves stock prices more than the results themselves, because markets are always pricing the future, not the past. Guidance typically appears as a range — say, "we expect revenue between $4.0 billion and $4.3 billion" — rather than a single number.

Analysts then compare management's guidance against their own consensus estimate. If guidance comes in above the consensus, it is called a "raise" or "upside guidance"; below the consensus is a "miss" or "downside guidance." A company can report strong historical earnings yet see its share price fall if guidance disappoints — a pattern sometimes called "sell the news."

One important nuance: management teams have an incentive to set guidance conservatively so they can beat it the following quarter — a practice sometimes called "sandbagging." Economists and analysts read a history of consistent guidance beats as a signal of either deliberate conservatism or genuine business momentum. Guidance is explicitly forward-looking and carries legal qualifications; companies label it as such in filings to limit liability. It is an estimate, not a promise.