Definition of Profit Warning
What is a "profit warning"? What is the definition of the term "profit warning"?
A "profit warning" is an advance notice (usually a couple of weeks) that a company gives when they expect that their earnings will fall short of previously expected levels.
For instance - let's say that XYZ has previously given guidance that their Q3 earnings are expected to come in at 98 cents per share, while their revenues are expected to be $101.2 million.
XYZ may issue a "profit warning" a few weeks before their Q3 earnings are to be released, warning investors that they will not be able to meet their projected earnings numbers.
What's the point of the "profit warning"? To "come clean" about an expected earnings shortfall weeks before earnings are due to be released, in the hopes that investor anger over the miss will have subsided somewhat before the "official" earnings numbers are actually released.
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