What is 'Forecasting' Forecasting is the use of historic data to determine the direction of future trends. Businesses utilize forecasting to determine how to allocate their budgets or plan for anticipated expenses for an upcoming period of time. This is typically based on the projected demand for the goods and services they offer.
BREAKING DOWN 'Forecasting'
Investors utilize forecasting to determine if events affecting a company, such as sales expectations, will increase or decrease the price of shares in that company. Forecasting also provides an important benchmark for firms, which need a long-term perspective of operations. Stock analysts use forecasting to extrapolate how trends, such as GDP or unemployment, will change in the coming quarter or year. The further out the forecast, the higher the chance that the estimate will be inaccurate. Finally, statisticians utilize forecasting in any situation that requires the use of forecasting. For instance, data may be collected regarding the impact of customer satisfaction by changing business hours or the productivity of employees upon changing certain work conditions. Forecasting Techniques Stock analysts use various forecasting methods to determine how a stock's price will move in the future. They might look at revenue and compare it to economic indicators. Changes to financial or statistical data are observed to determine the relationship between multiple variables. These relationships may be based on the passage of time or the occurrence of specific events. For example, a sales forecast may be based upon a specific period (the passage of the next 12 months) or the occurrence of an event (the purchase of a competitor’s business).
Stages of Forecasting Forecasting addresses a problem or set of data. Economists make assumptions regarding the situation being analyzed must be established before the variables of the forecasting are determined. Based on the items determined, an appropriate data set is selected and used in the manipulation of information. The data is analyzed, and the forecast is determined. Finally, a verification period occurs where the forecast is compared to the actual results in order to establish a more accurate model for forecasting in the future.
Qualitative forecasting models are useful in developing forecasts with a limited
scope. These models are highly reliant on expert opinions and are most beneficial in the short term. Examples of qualitative forecasting models include market research, polls and surveys that apply the Delphi method. Quantitative methods of forecasting exclude expert opinions and utilize statistical data based on quantitative information. Quantitative forecasting models include time series methods, discounting, analysis of leading or lagging indicators and econometric modeling.
Predictive Analytics
The use of statistics and modeling to determine future performance based on current and historical data. Predictive analytics look at patterns in data to determine if those patterns are likely to emerge again, which allows businesses and investors to adjust where they use their resources in order to take advantage of possible future events.
HP Issues Cautious Forecast, Plans
Job Cuts Expects to cut 3,000 to 4,000 employees from payroll over the next three years
ayroll is a company's list of its employees, but the term is commonly used to refer to: p the total amount of money that a company pays to its employees. a company's records of its employees' salaries and wages, bonuses, and withheld taxes. the company's department that calculates and pays these. http://www.slideshare.net/Euwinx/operations-management-forecasting
ENLARGE Outside HP Inc.’s headquarters in Palo Alto, Calif., in May. PHOTO: DAVID PAUL MORRIS/BLOOMBERG http://www.slideshare.net/Euwinx/operations-management-forecasting
By DON CLARK Updated Oct. 13, 2016 5:30 p.m. ET 5 COMMENTS
HP Inc. announced plans that include generating a bit less cash than analysts had anticipated in the next fiscal year while moving to further reduce the company’s head count. The big maker of printers and personal computers, which is grappling with declines in those markets, on Thursday disclosed plans during a meeting with analysts to cut 3,000 to 4,000 employees from its payroll over the next three years.
HP, formed in the breakup of Hewlett-Packard Co. a year ago, has trimmed about 3,000 employees since then. The company, which employs about 50,000 people, said it expects some people affected by the latest moves to keep similar jobs at separate companies that take over some HP operations on an outsourced basis.
HP said it expects the restructuring to generate $350 million to $500 million in charges and produce annual savings of $200 million to $300 million starting in fiscal 2020.
Aided by the effects of prior cost-cutting and other actions, the company told analysts it expects to increase its quarterly dividend by 7% in fiscal 2017 and report earnings in line with Wall Street expectations.
But HP executives acknowledged that they might disappoint some analysts with regard to free cash flow, a measure of the money left over after a company pays operating expenses. The company’s shares have risen for much of 2016, in large part because of analyst expectations about improvements in that metric.
The company said it expects to generate $2.3 billion to $2.6 billion in free cash flow in the fiscal year ending in October 2017. That compares with analysts’ average estimate of $2.76 billion for fiscal 2017 and $2.27 billion in the year ending in October, according to FactSet.
Cathie Lesjak, HP’s chief financial officer, attributed the estimate largely to the company’s success in the current fiscal year converting balance sheet items such as inventory into cash more quickly. Keeping up that pace of improvement, she said, will be difficult.
“It turns out to be a bit of a headwind,” Ms. Lesjak said in an interview ahead of the analyst meeting in New York.
Ms. Lesjak said HP expects to return 50% to 75% of free cash flow to shareholders through dividends and share repurchases in fiscal 2017, a target the company has said it expects to http://www.slideshare.net/Euwinx/operations-management-forecasting
exceed in the current fiscal year. HP plans to boost its share-buyback authorization by $3 billion, she said.
The company’s stock, up nearly 30% this year through Wednesday’s market close, declined 2% in Thursday after-hours trading following the announcements.
Dion Weisler, HP’s chief executive, stressed that the company is taking market share in personal computers and expects to spur long-term growth in printers. The company in September agreed to buy Samsung Electronics Co.’s printer business for $1.05 billion, a deal designed to bolster HP’s offerings in high-volume devices that handle both printing and copying for office work groups. Still, Mr. Weisler acknowledged that demand remains weak in both businesses. “As I look forward to 2017, our assumptions are that the markets are going to continue to be pretty challenged,” he said.
The company estimated it will report per-share earnings of $1.55 to $1.65 in its next fiscal year, excluding one-time items such as restructuring charges. Analysts on that basis had $1.64 a share for fiscal 2017, up from $1.61 a share in fiscal 2016, according to FactSet.
