Forecasting: financial management woes hurt forecasts.

• Author: Marshall, Jeffrey
• Position: BusinessBriefs

Despite all the advances in budgeting and forecasting in recent years, a lot of companies still miss analyst earnings-per-share projections by a sizable margin. About one in three companies in the S & P 500 missed their forecast by at least 10 percent in 2003's third quarter, for instance, according to Parson Consulting, a financial management consultancy.

To Parson, those results indicate "inadequacies in their financial management processes and systems that trigger faulty forecasting." Specifically, says Rick Fumo, president of Parson Consulting, too many organizations have processes that are "outdated or not sufficiently comprehensive." These inadequacies hurt both the companies and the analysts that follow them, Parson argues, because "without accurate information, analysts cannot make sound assessments of company performance."

Overall, 17.5 percent, or 88 of the companies in the S & P 500, fell short of analyst EPS expectations in the third quarter of 2003, with 7.3 percent of those companies missing by 10 percent or more on the downside. On the flip side, 25.6 percent of companies actually exceeded estimates by at least 10 percent.

While exceeding expectations is certainly better than falling short, positive variances suggest that the...