Most companies produce poor forecasts, new study finds.

• Author: Marshall, Jeffrey
• Position: EARNINGS - Report

Despite a market environment where missed earnings projections can lead to sharp stock declines, CFO firings or worse, most companies fail to accurately forecast earnings and sales, according to new research by strategic advisory firm The Hackett Group.

Based on results from its new Book of Numbers research, "Aligning Forecasting Practices with Market Dynamics," two out of every three companies are unable to accurately forecast earnings for the next quarter, missing the mark by anywhere from 6 percent to more than 30 percent. (And those are their internal numbers.) Companies do only slightly better when forecasting sales, according to Hackett's research.

More than half of the companies in the study were unable to accurately forecast sales for the next quarter. Accurate forecasts, for the Hackett study, were defined as being within 5 percent of actual results.

In addition, forecasting is becoming significantly more challenging: 14 percent of all companies in the study characterized themselves as "high risk/high volatility," a seven-fold increase from just three years ago. And it's believed this is likely to continue to increase, perhaps by nearly 50 percent over the next two years.

"It's shocking to see this level of poor performance in such a key area," said Fritz Roemer, who leads Hackett's Enterprise Performance Management Executive Advisory Program.

"We've seen companies take severe hits in the past few years after...