Some of Wall Street’s most valuable companies are scheduled to report their results this week.
Netflix set the pace last week with a more than doubling in subscriber numbers to more than 15 million for the quarter, record quarterly earnings and revenue.
Now investors wonder if the COVID-19 pandemic will clip the March results for other giants like Microsoft, Apple, Facebook and Amazon, as well Twitter, Tesla, Ford, Colgate Palmolive, Clorox (both should do well because of COVID-19), Pepsi Co and Mondolez and eBay.
Apple and Amazon are the most important of these giants and their results will do much to steady Wall Street which is still nervous, despite the big rebound since the lows around March 23.
So far this year Apple shares are off 3.6% (it has warned twice of the probable impact of the closure of stores globally and weak sales in China) while Amazon shares have surged 30% because it has emerged as one of the most important companies in the era of a COVID-19 lockdown.
Netflix shares remain up 31% after last week’s record-breaking performance.
The full impact of the virus on firms’ balance sheets won’t be for three months because of the damage that started in February and March spilled over into April, especially in oil, coal and energy generally.
All these companies will see big falls in revenues and earnings and losses for the current June quarter. Some in the media and energy may be forced to make massive write-downs on their goodwill and intangibles simply because the outlook is so weak.
Oil majors, BP, Shell, Total, Exxon Mobil Corp and Chevron Corp are due to report results this week that will be strewn with red ink from trading losses, write-downs and bit cuts to spending and investments as well as operating costs.
Earnings updates will also come from Spotify, Tesla, Mastercard, Visa, 3M, Sainsbury’s (the UK supermarket group), Merck, Pfizer, Pepsi, Starbucks, McDonald’s, UPS, AMD, Caterpillar, big European banks such as UBS, Deutsche Bank, Lloyds, Barclays, HSBC and RBS.
Gannett, the US newspaper publisher also releases results this week and they will not be pretty.
Starbucks has already warned of a possible 45% to 50% fall in earnings for the quarter because of sharp falls in sales in China and then the US and Europe.
The big loss-maker for the week could be Boeing, the planemaker. It lost billions in the closing months of 2019 because of the shutdown on the 737 Max plane.
Then all plane making was shut in March, now there’s reports that when it resumes making planes next month the number of 787s to be made will be half the previous number.
And finally the annual capitalism festival – AKA the Berkshire Hathaway annual meeting – will be very different this Saturday, May 2. It will be virtual, so the 50,000 or so people who normally trek to Omaha Nebraska, won’t be turning up in person.
Berkshire’s quarterly results will be out on Saturday as well and will give a clear indication of the damage done to the value of its share portfolio by the slump in share prices in February and March, up to the low point on March 23.
That period saw steep falls in the shares of Apple, Coca Cola, the banks (Bank of America, Well Fargo) airlines (American, Delta, United, and Southwest) and Occidental, a small oil company who took over rival Anadarko in mid-2019 with $US10 billion of financial support from Berkshire.
That now looks like an overpriced deal, much in the way the financing of the creation of Kraft Heinz by Buffett and Berkshire still is, with billions of dollars in losses and write-downs.
Kraft Heinz reports its March quarter figures this week. They could very well be better than expected because of its palette of consumer goods that were in high demand in the US in February and March as the great hoarding rush happened.
US retail sales fell 8.7% in March after falling 0.4% in February. Makers of products such as Kimberley Clark have already reported higher sales for the quarter because of the hoarding.
Certainly the likes of Kraft Heinz will be doing it tough going forward as the great buying rush vanishes and consumers face a day to day battle to husband their meagre income flows.
Berkshire shares are down17% so far this year and Kraft Heinz shares are off 9.7% (the smaller fall because investors believe it got a boost from the hoarding surge).
