This week, we are coming back to our guidance trends analyses, focusing on two smaller sectors in the Mexican market: Healthcare and Metals & Mining. As we have said in previous editions of this guidance series, common guidance metrics vary from sector to sector, and hence, so do best practices on this matter. The idea is that companies should share the metrics that are most relevant for investors and analysts’ model projections.
It is important to note that, as usual, we only consider guidance to be formal guidance if it is properly disclosed, numeric (even if it is a range), and not only broad management comments on a very high-level view of the direction the business is taking. As for the sector classification of companies, we are following the definitions from the BMV (Bolsa Mexicana de Valores).
Metals & Mining – Current formal guidance strategy
Source: Company Materials
*Notes:
Grupo Mexico disclosed market outlooks, as well as guidance on volume growth, revenue growth, operating ratio, and capital expenditures for the entire group up on a quarterly basis up until 2019. This was given through directional, range and point estimate metrics. Guidance was suspended due to the pandemic up until 4Q20, where guidance shifted to GMXT metrics only.
What can we read from this table?
- Currently, two out of the five players in the Mexican Metals & Mining industry provide formal guidance.
- For the companies that do provide guidance, the number of metrics is between two or three.
- Guidance on CapEx is provided by both companies that publish guidance.
- One of the companies provides guidance through its earnings results and calls, while the other only includes it in earnings presentations.
- One company shares guidance updates semi-annually on the second and fourth quarters of the year, and the other does so annually on the first quarter.
So, what do the largest metals and mining companies (by market cap) in the world do?
- BHP Group offers guidance updates in ranges on a quarterly basis through its press releases, earnings results, and calls. These updates consider production, adjusted effective tax rates, and unit cost
- Caterpillar suspended its guidance in 1Q20 and hasn’t taken it up since but used to disclose on estimated profit per share on a point estimate, quarterly basis. This was done through press releases, earnings results, and calls.
- Rio Tinto discusses their expectations for shipments, unit costs, operating cost, CapEx, production in earnings results and calls. This is done semi-annually on the second and fourth quarters, with both ranges and point estimates.
What should we learn from this?
Mexican companies include less metrics in their guidance than large international companies do. Guidance on production and CapEx was the most common in both Mexican and international players. Among the international players only, unit costs were also common.
In terms of the number of channels used to disclose guidance, Mexican peers stuck to one or two channels, while international companies used at least two or more. We believe making sure your guidance is easy to find is a best practice. Large caps update their guidance quarterly, whereas Mexican peers do so less often (annual, semi-annual).
Healthcare – Current formal guidance strategy
Source: Company Materials
Source: Company Materials*Notes:
Genomma Lab’s guidance has changed over time. In 2017, they reported their estimates on a point estimate and quarterly basis in their reports and calls, reporting on some or all the following: EBITDA margin and growth, Net sales growth, net revenues, free cash flow, and consolidated sales growth. Guidance was removed from reports in 2018, with some variable comments on earnings calls. Guidance was suspended completely after 2019.
What can we read from this table?
- Currently, none of the players in the Mexican Healthcare industry provide formal guidance.
- The only company that has given some guidance in the past, did so in a relatively inconsistent way.
So, what do the largest healthcare companies (by market cap) in the world do?
- Johnson & Johnson uses press releases, earnings results, and calls to disclose guidance using ranges on a quarterly basis. It provides an outlook on year-on-year sales growth (operational and reported), as well as adjusted regular and operational EPSs.
- United Health Group discloses point estimates on full year net earnings per share and adjusted earnings per share This is done through press releases, earnings results, and calls.
- Roche publishes its guidance quarterly in its earnings presentations, results and calls, discussing group sales growth, core EPS growth, dividend growth, and division and market These estimates are directional, range and point estimates.
What should we learn from this?
There is a significant difference in the size of the national and international peers that are discussed here, which clearly has an impact on guidance strategies. Either way, there is clearly great room for improvement in Mexican healthcare companies’ approach to guidance. Genomma Lab is by far the largest player, but still failed to deliver consistent metrics throughout reporting periods. Larger competitors seem to focus on sales and EPS metrics the most, ranging from 2 to 4 metrics. Updates are given with good, quarterly frequency and across more than one medium (press releases, reporting, etc.).
We think 2022 is a great year to relaunch guidance strategies. We understand the continued disruptions on many fronts (most notably in supply chains) represent a challenge for many companies, but investors and analysts will certainly appreciate any visibility companies can provide from their vantage point. If you would like to bounce some ideas for your new guidance strategy, let us know! We will be happy to help.
Contacts at Miranda Partners
Damian Fraser
Miranda Partners
damian.fraser@miranda-partners.com
Ana María Ybarra Corcuera
Miranda-IR
ana.ybarra@miranda-ir.com
