Yesterday, I shared a couple of reasons why the distinction between alleged omissions versus alleged misleading statements is an important one for securities litigation – and therefore should also be an important concept for disclosure lawyers to understand at the front end. One way this issue can arise in practice is when a company is considering whether to provide earnings guidance – and if so, how precisely.

As Meredith blogged earlier this year, some companies ceased providing guidance during the early stages of this year’s tariff announcements – but as time went on, the more common practice shifted to modifying the way in which guidance was presented, with very few companies precisely quantifying the expected impact of tariffs.

This Woodruff Sawyer blog from Lenin Lopez points out that this builds on a trend that began during pandemic times:

It’s important to note that during and after the COVID-19 era, companies across industries chose to resist the pressure to guide precisely. Instead, many now provide narrative commentary or broad ranges—an approach better suited to the current operating environment, which has been and continues to be characterized by evolving regulatory and political dynamics, longer commercialization runways, and so much more.

As an example, we have seen life science companies increasingly issue milestone-driven updates tied to clinical trials or US Food and Drug Administration (FDA) engagement, rather than revenue forecasts. Artificial intelligence and semiconductor companies, meanwhile, may offer qualitative guidance reflecting customer demand and capacity trends, rather than committing to specific quarterly bookings or earnings.

This pivot to a more cautious approach may be attributed, in part, to some companies getting punished by the market after guidance surprises that led to stock price drops, and plaintiffs’ firms filing securities class action lawsuits as a result.

Lenin shares a couple of striking data points to emphasize that a significant portion of securities class action suits follow a company’s lowering or withdrawal of guidance. He points out that projections that missed the mark can also be fodder for government enforcement actions, especially if the SEC is prioritizing “fraud.” Lenin also provides a few best practices to balance demands of “the Street” with the risks of litigation and enforcement, including suggested responses to help maintain discipline in analyst Q&As and recommendations for modeling risks that could affect projections. Check out his blog for more detail!

For additional resources on this topic, members also can visit our “Earnings Guidance” Practice Area. If you do not have access to the Practice Areas and all of the other practical guidance that is available here on TheCorporateCounsel.net, try a no-risk trial now. Our “100-Day Promise” guarantees that during the first 100 days as an activated member, you may cancel for any reason and receive a full refund. If you need assistance, send us an email at info@ccrcorp.com – or call us at 800.737.1271.

– Liz Dunshee