The US March quarter earnings reports starts in earnest this week and will be one of the most confused on record. Europe will also see much of the same as dozens of companies either have already cut or chopped dividends, much like Australia.
The confusion, weaker than forecast results, losses and dividend cuts will be thanks to the COVID-19 pandemic’s impact on global economic activity through the lockdowns and social distancing rules adopted in many states and countries to try and contain the infection and death rates.
The International Monetary Funds (IMF) gives an important clue tonight with its first World Economic Outlook for the year to be released and showing a double-digit drop in activity in many economies.
China provides another clue with its March trade report today and its March quarter GDP figure on Friday which is tipped to show a double-digit drop from the December quarter.
The AMP’s chief economist, Dr. Shane Oliver says the March quarterly season is likely to show a sharp fall as shutdowns impact with negative/uncertain outlook comments.
Australia has a small season with the big banks like Westpac, NAB, ANZ releasing half-year results and dividend levels (if any) and Macquarie Group releasing its full-year figures.
Industrial groups such as CSR, James Hardie, Orica, Incitec Pivot and Elders also balance their interim full year or latest quarterly reports on Match 31 and will report in the next month.
Banks dominate the coming week in the US with giants, JPMorgan Chase and Wells Fargo issuing their quarterly reports tonight, our time and Citigroup and Morgan Stanley issuing their reports tomorrow.
The trading side of the businesses took a battering in the sell-off in March and then the impact of the COVID-19 related restrictions on business and then the US Federal reserve’s multi-trillion dollar rescue and support packages.
But big questions remain about the damage done to their assets, especially their loan books and managed portfolios took from the collapse in bond yields and share prices in February and March, and the closure of hundreds of thousands of small businesses.
Other US groups expected to report include pharma giants, Johnson & Johnson and Abbott Labs could show different figures thanks to demand for some of the products, such as pain killers.
US trucking giant, JB Hunt Transport will also reveal a terrible result as its shipped volumes reportedly plunged in March as wide sectors of the US economy went into lockdown.
Ad group, Omnicon will be another important indicator – its views on the future direction of ad and marketing send will tell us a lot about the health of the US and global economies.
Big fund managers and financial group, Blackrock and Blackstone will be upbeat but the market instability will have hit them hard.
Manufacturers Honeywell are down to report and if they do they should reveal reasonable results because they have little direct exposure to consumer facings sectors such as retailing.
And possibly the most important set of figures will be released on Friday by oil services giant, Schlumberger. The company could report weak figures triggered by the slide in oil prices in March and the cuts to spending by clients.
But an even worse set of figures this quarter and next awaits with impact of more cuts – especially in the US fracking sector – to hit hard.
And finally, Starbucks slipped out a earnings downgrade last week that many investors missed or failed to note its importance in the run up to Easter and the strains of social distancing and isolation.
Starbucks Corp. said in a filing with the US SEC on Wednesday that second-quarter earnings will be chopped roughly in half from a year ago due to the spread of COVID-19 in China and then the US.
Starbucks revealed that it expects adjusted earnings of 28 cents to 32 cents a share for the second quarter, which would be down from 60 cents a share in the second quarter of 2019.
“These estimates reflect the impact of lost sales for the period as well as incremental expenses for partner wages and benefits, store operations and other activities related to the COVID-19 outbreak,” the company said. “this includes inventory write-offs, honoring supplier obligations, store safety-related items, asset impairments and preliminary estimates of certain government stimulus program benefits.”
US analysts had on average expected earnings of 39 cents a share, so they were way out.
The company also withdrew its annual guidance for the year to September 30. Starbucks said it expects to report second-quarter earnings in full on April 28.
Starbucks will not be the first major company to make a mess of market forecasts.
And its also gloomy in Europe where there has already (like Australia) been a long line of earnings and dividend downgrades or cuts.
Reuters reported that more than 80 of the top 600 listed companies (in the Stoxx 600 index) in Europe cut or scrapped dividends between February 24 and April 8,
“Among the latest to suspend dividends were French aerospace and defence supplier Thales and Swedish metal-cutting tools and mining gear maker Sandvik on Tuesday.
“UK-listed companies could cancel about $US60 billion in dividends this year, according to a report by analytics company Link Group,” Reuters reported.
