Reference no: EM132235680
Assignment -
Context - Senior management personnel, in attempting to be responsive to their stakeholders' demands for projections, have to walk a very thin line. Being overly pessimistic could hurt the current stock price, unnecessarily. However, if they are overly optimistic - and then are not able to actually attain those projections - the investment community will ensure that management feels their pain. (There is much research and literature available on the subject of "earnings surprises". Many of the financial information sources keep scorecards of positive and negative "earnings surprises".) And not making any projection at all may be interpreted as (1) management 'hiding' something, (2) management being too timid, and/or (3) management simply not having a clue: none are very favorable to the management, or to the company.
That said, the reasons why a company achieved results different from projected is usually what interests shareholders the most. The "rear-view mirror" of financial statements is primarily valuable for what it suggests about a company's future performance.
How do companies fare in making projections, and why?
Article: PFIZER REPORTS FOURTH-QUARTER AND FULL-YEAR 2015 RESULTS
Group Assignment: Please Just Do Question 2 (around 200 words) and barely write question 3.
In February of 2016, Pfizer Inc. provided "guidance" (i.e., their expectations) for Revenues and Expenses, for all of 2016.
Use the midpoint of the projected range as their projection.
1. Compare these projections to what actually materialized that year, based on what they reported in the Annual Report of 2016. Comment on how close or far their guidance numbers were, compated to the actual results.
2. Comment on how the company's stock price appears to have reacted, after the actual earnings of 2016 were publicly released. Was there an immediate reaction (first day or days)? Would you attribute any of the change in the stock price to how near/far they were from their projections?
3. Discuss in some detail as many relevant factors as you can, that explain why the actual experience may have diverged from the original management forecast.
These factors can be derived from management's own explanations (but you'll need to comment critically on the validity of their assertions); research analysts' comments; or your own logic. Please attribute each factor to the type of source (i.e., Stock Analyst, Company Statement, your group's own analysis, etc.)
4. Categorize the above factors into (1) macroeconomic, such as changes in the economy, exchange rates, etc. (include here any factor that would not be unique to this company, nor specific to its industry); (2) industry-specific; and (3) company-specific.
5. Rank these factors in order of what you consider to be the most significant in explaining the forecast "miss", and explain your reasons.
Attachment:- Assignment Files.rar