Guidance is a set of the company's own best estimates of its upcoming earnings or performance, issued typically right after its announced earnings for the past quarter. Guidance statements often take the form of a numerical range, such of earnings per share, sales, cash flow, units sold, and other financial performance data. Companies generally combine their guidance statements with a disclosure statement in order to inform investors and analysts that the projected results are not guaranteed and that the company is not liable for any errors or inaccuracies in the guidance.

Guidance statements are important pieces of information that are used to form investors’ and analysts’ expectations for a company’s upcoming performance. Usually, these expectations are used to adjust the share price in light of the new information. Guidance therefore serves as an important tool for investors and analysts to gauge and predict a company’s potential performance.

Issuing guidance also helps companies build credibility with their shareholders and gives insight into management’s view of the future of the company. If the projections are met and the company meets or beats its guidance, shareholders are likely to view the company favorably, as opposed to if the guidance is not met. This is why companies want to avoid issuing guidance that is too ambitious, as they could be open to lawsuits if they don’t reach those expectations.

In the end, guidance statements are a key component of the way companies communicate to their shareholders and other stakeholders. Guidance can help investors and analysts better understand the projected trajectory of the company, making it an important tool in the investing process.