Earnings to Give Look Into Crisis -- WSJ

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 [e-mail]

(END) Dow Jones Newswires

April 20, 2020 02:47 ET (06:47 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.