Broker survey reveals more than half would look more long term in absence of quarterly numbers

Citi analysts encouraged to comment on pros and cons of 3-month reports.

An internal survey of sell-side analysts at Citi, the broker research arm of Citigroup, has revealed that 57% of 207 responding stock coverage analysts agreed that they would look more at long-term value drivers in companies if the requirement to issue quarterly earnings reports was lifted. A recent white paper by Generation Investment Management on ‘Sustainable Capitalism’ said corporates should resist reporting numbers every three months because it encourages short-termism. Interestingly, only Citi analysts in the US disagreed – 71% against – with the question asked: “If companies were not required to issue quarterly reports it would help me consider topics that drive longer-term valuation implications for my coverage companies: Agree or Disagree?” One analyst said US-based clients tended to have much shorter viewpoints while EU analysts and buy-side investors preferred to think a bit longer term and so risked being distracted by quarterly “noise”.Over two-thirds of EMEA analysts (66%) and AsiaPac (70%) analysts were in favour of the statement, while the strongest views were in Australia (100% agreed) and Japan (93%). The survey indicated that more senior analysts (Managing Directors and Directors) agreed (60%) than less experienced junior analysts (Vice Presidents, Analysts and Associates) (54%). Sell-side research analysts are a key part of the financial reporting/evaluation chain and their views play a significant role in market analysis of corporate results. Analyst comments on quarterly reporting were encouraged and included in the paper. Some argue that while it is best not to look at one quarter in isolation, the impact of material events for capital-intensive companies needs to be monitored quarterly. Others argue that there is too much focus on the short term and that semi-annual reporting is more than sufficient for most companies.
Link to report