Barry Diller says his firm will put an end to absurd earnings guidance

On Friday, Barry Diller, chairman of Expedia and digital group IAC announced that his companies will stop providing long-term earnings forecasts. In his words, “guidance is a bad business. Were out. We’re not doing it anymore,” he said. He also added that the time employees spent in developing guidance is simply “wasteful” and the time could be channeled to something more productive. 

“It kind of gave us the opportunity to say, you know what? Guidance is a bad business. We’re out… We’re not doing it anymore, for either Expedia or for IAC,” Diller told CNBC. 

Since the start of the coronavirus pandemic, many companies have postponed earnings guidance due to the many uncertainties surrounding the coronavirus pandemic. Diller gave Expedia and IAC the opportunity to put an end to issuing guidance and he hopes other companies will follow suit.

“I would hope that this period would allow all these companies to say, ‘Be gone with your guidance.’ It’s not a good game. Spend your time actually figuring out where you should invest your money, how you should run your company,” Diller said. “I’d love it as a practice to end for everybody.”

The issue of putting an end to earnings guidance has been a topic of debate on Wall Street for a long time. While many find it absolutely absurd to have guidance earnings, some others have argued that guidance helps companies stay accountable to shareholders.

“I mean, it keeps companies accountable? It keeps companies doing dumbass work.”

In his defense, Diller said that quarterly guidance and full-year outlooks “made some sense” when it began, but has since lost its value.

“Companies spend too much time messaging the process, getting the model right so that they can always beat, not miss expectations, and the markets are always reactionary on that wildly short-term, dumbness of what happened in the next quarter,” he said. 

On a final note, Diller said: “You cannot predict the future. Full stop.”

In 2018, Warren Buffett of Berkshire Hathaway and Jamie Dimon of JPMorgan’s teamed up to call for the end of issuing earnings projections. Dimon said there was a huge support behind companies that were putting a stop to giving outlook. Buffett does not buy the idea of being accountable to shareholders by releasing outlooks as the practice can instead cause executives to manipulate numbers to either meet or beat expectations. He said Hathaway does not provide guidance.