Coca-Cola Co, the world's largest soft-drink maker, will stop making earnings forecasts after this quarter, following the lead of its largest shareholder, billionaire Warren Buffett.
Focusing on profit targets is a distraction from longer-term objectives that enhance growth, the company said in a statement.
Coca-Cola's shares had their the biggest one-day decline in four years in October after the company lowered its forecast because of slowing sales in Latin America. Some investors said the move may foreshadow less-predictable results.
"If this change implies more quarterly volatility, it's not a good thing," said Keith Patriquin, an analyst with Loomis Sayles & Co, which has more than 200,000 shares. "That's not what investors will reward Coke for."
Buffett, a Coca-Cola director, doesn't make such forecasts at investment firm Berkshire Hathaway Inc Gillette Co, another company where Buffett is a director and shareholder, stopped such estimates in January 2001. The change comes as analysts are challenged to develop more independent research amid concerns about conflicts of interest with companies they cover.
"I don't see a lot of benefit from shutting down management from talking to Wall Street," said Carl Domino, president of Northern Trust Value Investors, whose parent owns 19 million Coca-Cola shares.
It reaffirmed profit forecasts for this year and next year.
Analysts surveyed by Thomson First Call expect profit of US$1.76 a share this year and US$1.93 next year. Coca-Cola had net income of US$3.96 billion, or US$1.60 a share, on sales of US$20 billion last year.
Shares of Coca-Cola fell US$0.02 to US$45.85 at 4pm in New York Stock Exchange composite trading. The Atlanta-based company's shares have dropped 2.8 percent this year, compared with a 16 percent decline for the Dow Jones Industrial Average.
Managers of US companies have trimmed expenses such as marketing and advertising and advanced profit or revenue to meet forecasts, investors say.
"If management is spending all its time trying to get that last penny of earnings into a quarter, is that the best use of its time?" said Phil Larkins of Legacy South Inc, which holds about 150,000 Coca-Cola shares.
Investors have become skeptical of those maneuvers in the past year, and have been demanding more clarity in financial statements following the bankruptcy filings of Enron Corp, WorldCom Inc and Global Crossing Ltd.
Procter & Gamble Co said on Friday it will report only net income to investors rather than also providing a profit number that excludes costs for plant closings and firings.
In July, Coca-Cola said it will start accounting for stock options as an expense.
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