Revenue Reports: A Make or Break For Many Companies

It’s tax day in the US. But besides all the excitement surrounding today’s political events and the dreaded yearly tradition of making amends with the IRS, many companies are beginning to report their first quarter revenues. Earnings in general so far have been a mixed bag. Some companies are outperforming their predictions while others are utterly under performing. And with the stock market in a bit of a recent bull trend, it’s a no-brainer that it definitely helps when more companies are reporting earnings that are higher than expected. But this quarter’s earnings reports have taught many companies and also many investors a valuable lesson.

When a company out performs its earnings predictions many investors and consumers get excited about possible growth or the company straying from the norm of falling profits and deepening debts. The company’s stock is likely to go up along with the sentiments of the nation and people make money, the economy is a shade brighter. But for companies that fall short in the earnings department, just the opposite can occur. Consumer and investor confidence can shift and fade; leaving companies that can’t hit their revenue targets in the dust of this most recent economic recession.

Companies need to focus not on attaining their earnings goals so much as setting realistic revenue goals in the first place. A company my lower it’s earnings prediction and suffer a very short term down trend in the value of their stock, but having more realistic, and therefore that much more attainable goals benefits not only those who hold stock, but also the companies themselves. Slow, sustained growth is key to any economy. Sure there are going to be companies that shoot right to the top of their sector but I truly feel that if the recession is going to be shook off, there needs to be sustained, consistent growth in many key sectors. We’ve seen some real exponential growth in the financials market sectors recently but no real sustainable gains. Sure many people might have made a quick buck or two but when it comes down to the basic health of the sector, nothing beats slow but steady growth.

So by lowering these targets, not only do the investors gain, but the company’s gain as well. For example, a company that can show steady growth throughout the year, not only during the fourth quarter when the holidays are near, is going to be a much more desirable investment for overseas investors as well. Right now investors as well as consumers worldwide are looking for a sure thing. They don’t care if the return on their investment is only a few percentage points per year at this point. I know this to be true because of the huge rush to buy US backed treasury bonds at negative yields. People want to be sure that wherever they put their money for the short to mid term right now that it’s safe and secure. They value this security over returns right now. So it’s capital preservation over speculation at this point.