Bulletin
Investor Alert

Earnings Watch Archives | Email alerts

May 10, 2020, 6:34 p.m. EDT

Time to take a breath as earnings slow, but you may want to avoid the numbers to stay calm

Earnings Watch: After a hectic two-week stretch, S&P500 earnings are expected to decline 13.6% from last year, and worst may be yet to come

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

  • X
    S&P 500 Index (SPX)
  • X
    Dow Jones Industrial Average (DJIA)
  • X
    Cisco Systems Inc. (CSCO)

or Cancel Already have a watchlist? Log In

By Tomi Kilgore, MarketWatch , Emily Bary


MarketWatch photo illustration/Getty Images, iStockphoto
At least this week will be slower ...

While the tone of first-quarter earnings isn’t particularly encouraging, the pace of reports will finally relax in the week ahead, which is reason enough to breathe a sigh of relief.

More than 85% of S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.24%   companies have reported earnings this quarter — most of them in the past two weeks — and just 18 components are set to report in the week ahead, along with only one Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.13%  company: Cisco Systems Inc. /zigman2/quotes/209509471/composite CSCO +0.47%  .

It hasn’t been a pretty stretch thus far as companies detailed the early impacts of the COVID-19 pandemic on their financial performance. Aggregate earnings for the first quarter are expected to be down about 13.6% from a year ago, the worst performance since the third quarter of 2009, according to FactSet Senior Earnings Analyst John Butters. That is way down from expectations for 4.5% growth at the start of the first quarter.

Of the companies that have reported results, 66% beat earnings-per-share expectations, according to Butters, coming in below the 5-year average of 73%. This quarter’s beat rate is on track to be the lowest since the fourth-quarter of 2016.

Business in the Age of COVID-19: More on how the largest companies are being affected by the pandemic

The worst performing sector thus far is consumer discretionary, which has seen earnings nearly cut in half as COVID-19 related lockdowns keep restaurants and retailers shuttered. The financial sector has also struggled, with profits off 43.5%. The dismal trends in retail and banking make energy results almost look good by comparison. Earnings are down 27.9%, as crude oil futures /zigman2/quotes/209723049/delayed CL00 -0.42%   have plunged 61% over the past 12 months.

The best-performing sectors are utilities, sporting 6.8% earnings growth, and health care, which saw profits climb 6.6%.

Earnings are expected to be far worse for the second quarter, with analysts calling for a 41% plunge, according to FactSet. That would mark the biggest drop since the first quarter of 2009, with 10 of 11 sectors showing declines. As of Dec. 31, analysts were projecting a 6% earnings increase for the second quarter and growth in all sectors but financial.

The more muted earnings slate in the week ahead features Cisco, with a read on corporate technology spending, along with a basket of retailers and pot companies. Here are some of the highlights.

Shop talk

We’re about to get a look at how retail companies fared during the early weeks of the COVID-19 epidemic. Under Armour Inc. /zigman2/quotes/204420722/composite UAA -1.07%  is the biggest name to watch for, and while the company may not have been hurt too much in the first quarter, Pivotal Research Group’s Mitch Kummetz is worried that retail partners have “cautiously reined in their fall prebooks.” He’ll also be looking for a quantifiable impact from the company’s cost-cutting initiatives when the apparel company reports Monday morning.

Joining Under Armour Monday is Coty Inc. /zigman2/quotes/208645074/composite COTY -5.10%  , which will show how makeup sales are holding up now that people aren’t leaving their homes. VF Corp. /zigman2/quotes/206706147/composite VFC -2.11%  closes out the week with its Friday morning report. The company’s Vans brand doesn’t benefit from stay-at-home fitness trends, Wedbush analyst Christopher Svezia said, but he expects it to “see growth rapidly resume” once consumer-buying habits return to normal.

Hoarding tech?

Cisco will discuss the corporate spending landscape Wednesday afternoon and while the company may have seen strength in its enterprise segment for the April quarter, Raymond James analyst Simon Leopold is worried about what’s to come. “We worry about a potential spending pause stemming from large enterprises and service providers,” he wrote, and some of April’s sales might have reflected “hoarding driven by fear of supply shortages related to COVID-19.”

Where there’s smoke ...

The struggling cannabis industry will be prevalent, starting with results Monday afternoon from former IPO darling Tilray Inc. /zigman2/quotes/209129655/composite TLRY +13.79%  and GW Pharmaceuticals PLC. /zigman2/quotes/209686240/composite GWPH +1.65%  . Tilray managed to find financing in a tough funding environment earlier this quarter, but the terms were not so friendly, while GW Pharma’s marijuna-based epilepsy-drug sales are not expected to be affected too much from the pandemic.

On Thursday afternoon, Aurora Cannabis Inc. /zigman2/quotes/210559470/composite ACB +20.21%   /zigman2/quotes/203734337/delayed CA:ACB +17.94%  will report after the company’s 12-to-1 reverse stock split takes place ahead of next week’s first trading session. Beyond bundling stock, there have been many changes at Aurora in recent months, including the departure of CEO Terry Booth — the company could have some news on a permanent replacement, or just detail the plans for continuing with interim leader Michael Singer. The company’s market share dropped in the last quarter and executives launched cheaper pot in response — Canadians want inexpensive weed, as it turns out — so investors should expect to see early indications of how that effort fares.

A glimpse at China

JD.com Inc. /zigman2/quotes/205122565/composite JD +1.34%  offers a look Friday morning at how Chinese e-commerce companies weathered the crisis. UBS analyst Jerry Liu is enthusiastic about the company’s March rebound but will be looking for commentary on two key risks ahead: “secondary impacts from the global outbreak on China consumption, and [a] potential second wave or asymptomatic cases in China.” These threaten to hamper the company’s recovery, he said.

/zigman2/quotes/210599714/realtime
US : S&P US
3,638.35
+8.70 +0.24%
Volume: 1.22B
Nov. 27, 2020 2:07p
loading...
/zigman2/quotes/210598065/realtime
US : Dow Jones Global
29,910.37
+37.90 +0.13%
Volume: 178.10M
Nov. 27, 2020 2:07p
loading...
/zigman2/quotes/209509471/composite
US : U.S.: Nasdaq
$ 42.70
+0.20 +0.47%
Volume: 10.77M
Nov. 27, 2020 1:00p
P/E Ratio
17.34
Dividend Yield
3.37%
Market Cap
$179.58 billion
Rev. per Employee
$636,155
loading...
/zigman2/quotes/209723049/delayed
US : U.S.: Nymex
$ 45.52
-0.19 -0.42%
Volume: 351,413
Nov. 27, 2020 1:44p
loading...
/zigman2/quotes/204420722/composite
US : U.S.: NYSE
$ 16.68
-0.18 -1.07%
Volume: 2.52M
Nov. 27, 2020 1:10p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$7.19 billion
Rev. per Employee
$320,021
loading...
/zigman2/quotes/208645074/composite
US : U.S.: NYSE
$ 6.89
-0.37 -5.10%
Volume: 20.01M
Nov. 27, 2020 1:10p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$5.56 billion
Rev. per Employee
$258,335
loading...
/zigman2/quotes/206706147/composite
US : U.S.: NYSE
$ 85.72
-1.85 -2.11%
Volume: 1.04M
Nov. 27, 2020 3:30p
P/E Ratio
N/A
Dividend Yield
2.29%
Market Cap
$34.15 billion
Rev. per Employee
$218,888
loading...
/zigman2/quotes/209129655/composite
US : U.S.: Nasdaq
$ 8.50
+1.03 +13.79%
Volume: 30.79M
Nov. 27, 2020 1:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$997.44 million
Rev. per Employee
$101,445
loading...
/zigman2/quotes/209686240/composite
US : U.S.: Nasdaq
$ 129.71
+2.10 +1.65%
Volume: 259,682
Nov. 27, 2020 1:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$3.98 billion
Rev. per Employee
$346,971
loading...
/zigman2/quotes/210559470/composite
US : U.S.: NYSE
$ 10.47
+1.76 +20.21%
Volume: 51.75M
Nov. 27, 2020 1:10p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.59 billion
Rev. per Employee
$76,070
loading...
/zigman2/quotes/203734337/delayed
CA : Canada: Toronto
$ 13.74
+2.09 +17.94%
Volume: 16.88M
Nov. 27, 2020 5:40p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$2.14 billion
Rev. per Employee
$102,126
loading...
/zigman2/quotes/205122565/composite
US : U.S.: Nasdaq
$ 89.41
+1.18 +1.34%
Volume: 5.79M
Nov. 27, 2020 1:00p
P/E Ratio
34.52
Dividend Yield
N/A
Market Cap
$135.45 billion
Rev. per Employee
$366,609
loading...

Tomi Kilgore is MarketWatch's deputy investing and corporate news editor and is based in New York. You can follow him on Twitter @TomiKilgore. Emily Bary is a MarketWatch reporter based in New York.

This Story has 0 Comments
Be the first to comment
More News In
Industries

Story Conversation

Commenting FAQs »
Link to MarketWatch's Slice.