Capital Markets / Investor Relations in Two Minutes or Less
Key Observations from 4Q23 Earnings
Fourth quarter earnings were in full effect this week with lots ups and downs around specific company reports.
Transocean, Palo Alto Networks, Zscaler, and Teladoc were among the more eventful prints this week.
Here are five key observations that public company executives can learn from these companies earnings:
1. Earnings Is About Forward Guidance
Management teams fail to realize that good forward guidance and sound financial expectations management represents the most powerful driver of valuation at their disposal.
Conversely, too much time is spent on trumpeting accomplishments that happened, which no longer represent valuation drivers.
2. Lowering Guidance
Decelerating revenue growth off set by higher margins will not save your valuation.
Management needs to be ahead of abrupt changes in revenue growth and always needs to exhibit cost control discipline!
3. Save Long Term Guidance for an Analyst Day
Two things to consider: credibility and nuance.
No one wants to be the company that provides long term guidance in a paragraph only to change that guidance three quarters later.
Use your analyst day to provide a proper thoughtful and nuanced discussion of the key inputs behind your long term guidance. Such a presentation is required to maintain credibility and have that guidance reflected in the valuation.
4. Customer Spending Trends
Always be thoughtful and cautious about discussing consumer spending trends.
Negative narratives around customer spending will hurt your and your competitors.
A great example is Zscaler’s earnings, where they significantly increased guidance, but the stock still took a significant hit.
5. Sales Cycles
The narrative of lengthening sales cycles will always kill your valuation.
Investors see right through this as a hollow explanation.
Why?
Investors, like Hall of Fame management teams, recognize that there is a balance between taking any business and waiting for surge pricing.
A company cannot afford to take a quarter off from executing on its business!
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