Earnings to Give Look Into Crisis -- WSJ
April 20 2020 - 3:02AM
Dow Jones News
By Allison Prang
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (April 20, 2020).
Almost a fifth of S&P 500 companies are scheduled to report
earnings this week, giving investors a look into how the Covid-19
pandemic has ravaged different sectors of the economy, from
airlines to tech companies.
Many of the companies reporting -- including Delta Air Lines
Inc., Coca-Cola Co. and International Business Machines Corp. --
are logging results for the first three months of 2020. The results
will show only some of the fallout from the coronavirus pandemic as
the U.S. economy didn't shut down widely until the quarter's final
few weeks.
Jonathan Golub, chief U.S. equity strategist for Credit Suisse
Securities, said those businesses forced to close or curtail
operations during the shutdown are likely to struggle. "They're
going to really be treated much rougher in this environment," he
said.
Less than a tenth of the S&P 500 have reported results so
far this earnings season, and profits have fallen almost 15%,
according to FactSet. If that decline holds after other companies
report their results, it would be the biggest year-over-year profit
decline since the third quarter of 2009, when earnings dropped
almost 16%, FactSet said.
One company expected to benefit from the current stay-at-home
culture is video-streaming company Netflix Inc., which reports its
results Tuesday.
"Streaming video is an outlier in the media industry in that
it's insulated from -- or even boosted by -- the Covid-19 outbreak,
and Netflix is certainly reaping the benefits," Dan Morgan, senior
portfolio manager at Synovus Trust Co., said in an email.
Overall, the tech industry is among those sectors better
positioned during the pandemic. Credit Suisse's Mr. Golub said tech
companies can be more flexible because they don't have as many
overhead costs as other industries. People are also shopping online
and using video for work, he said.
"We're using plenty of tech," he said. On Monday, IBM will
report results for the first quarter, and Intel Corp. is supposed
to give its results on Thursday.
Many regional banking companies are reporting Monday. Last week,
many of the bigger nationwide banks reported sharp declines in
profits as they set aside billions of dollars to cover expected
losses on loans in what is likely to be a painful recession.
Beverage and snack company Coca-Cola is expected to report its
first-quarter results before the market opens Tuesday. Last month,
the company said it was probably going to fall short of the
financial outlook it provided. The company cited the decline in
people going to restaurants and traveling, as well as entertainment
and sports events being canceled.
Many companies withdrew the guidance they had given for future
results, citing the economic uncertainty. "That's really
problematic because it means that we're kind of flying blind a
little bit," Mr. Golub said.
Delta Air Lines and Southwest Airlines Co. report results
Wednesday and Thursday, respectively. The travel industry has been
decimated amid the outbreak, and multiple airlines have already
accepted financial help from the federal government.
On Friday, American Express Co. and Verizon Communications Inc.
will both share their results.
Despite the decline in earnings, the results have been better
than expected. About two-thirds of the companies that have reported
so far have logged per-share earnings above analysts' expectations,
according to FactSet, and more of them, 70%, surpassed revenue
estimates.
Write to Allison Prang at allison.prang@wsj.com
(END) Dow Jones Newswires
April 20, 2020 02:47 ET (06:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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