Elaborate annual meetings dying
NEW YORK: General Electric Co once set the agenda for entire industries by sharing its outlook for the coming year at elaborate December gatherings.
The meetings, sometimes held at the iconic Saturday Night Live studio at Manhattan’s 30 Rockefeller Plaza, became a Wall Street ritual — and often sparked a stock pop. Another titan of industry, United Technologies Corp, was known for renting out art museums for its confabs.
Not anymore.
The year-ahead events that once dotted the calendar in December are all but gone as companies opt to unveil annual forecasts in January, February or even March. The industrial sector is leading the way on delayed outlooks as a manufacturing slowdown and trade volatility make forecasting more difficult.
“With the heightened stage of uncertainty with trade and the direction of the economy, this gives companies another two months not to have to calibrate and describe the coming year,” said Deane Dray, an analyst with RBC Capital Markets.
This year, for the first time, none of the 29 companies he covers will hold an outlook meeting.
GE and UTC in recent years have both stopped holding events to spotlight their earnings forecasts, as have Honeywell International Inc, Johnson Controls International, WW Grainger Inc and Dover Corp. This year, 3M Co also called it off.
Auto executives traditionally convened every January in Detroit at the North American International Auto Show, and CEOs held parallel events to give early glimpses of quarterly results and guidance for the new year.
For 2020, the show moves to June, and no new meetings are set to fill the void. General Motors Co and Ford Motor Co so far aren’t planning any investor briefings before fourth-quarter earnings in early February.
The new approach goes beyond manufacturers. For years, Walmart Inc held an annual investor meeting in October to give guidance for the upcoming fiscal year. But this year the retail giant decided to push out the event until after its fourth-quarter report in February.
At GE, former chief executive Jack Welch used the outlook events in December to generate enthusiasm and a late-year stock pop, said Nicholas Heymann, an analyst with William Blair & Co. “It was like a double Christmas rally.”
The success of the meetings prompted other industrial companies to follow suit, Heymann said.
GE is helping lead the way again — in the opposite direction — as it’s been roiled by management turmoil, market downturns and a deterioration in finances.
Former CEO Jeffrey Immelt, who hosted multiple outlook meetings from the SNL studio, stepped down in 2017 and successor John Flannery was ousted a little over a year later.
Current CEO Larry Culp, trying to lead a turnaround after an epic share rout, waited until March 2019 before offering this year’s guidance.
“We are committed to enhancing transparency to help investors understand the opportunities for GE as well as the risks we face on our multiyear transformation, and we look forward to updating investors on our outlook in early 2020,” the company said in an e-mail.
“While the shift away from year-end outlooks is partly influenced by market volatility, it also reflects a ‘herd mentality’ by companies that don’t want to move alone,’’ said RBC’s Dray.
Delaying the forecast could be seen by investors as a red flag, he said, so many companies waited for their peers to move before they took the leap.
“All you needed was a couple of the companies to decide they weren’t going to do it, and everyone said, ‘Then we’re not going to do it either,’” said Dray, who had long referred to the spate of December meetings as the “fifth earnings season.”
3M, which cut its 2019 forecast multiple times this year amid market volatility, didn’t respond to a request for comment. United Technologies declined to comment.
Honeywell, which unlike some peers has had a strong 2019, said the change was driven in part by the preferences of investors and analysts.
While the company already provided an early look at next year’s trends, it will wait until next year to offer a more complete picture.
“Over the last few years, we heard from our shareowners and analysts that they prefer fewer, more impactful meetings,” the company said by e-mail. “As a result, beginning in 2018, we decided to combine our outlook call with our fourth quarter earnings call, which typically occurs in late January.”
“Only about a third of public companies provide specific financial and market outlooks, which can help reduce volatility in share prices and provide a check on analysts’ estimates,’’ said Baruch Lev, an accounting professor at New York University‘s Stern School of Business who specialises in investor relations and financial reporting.
“While delaying guidance can reduce shareholders’ visibility into a company, it makes sense for management to wait for the new year to present an outlook, ‘when the past is clearer and guidance is most needed,” he said.
“The sooner investors get information the better,” Lev said. “But in the big scheme of things, there are limits to what managers can say about the future.”