With the Q1 2020 earnings season nearing its conclusion, it is clear that with the COVID-19 pandemic continuing to devastate the global economy, executives at some of the largest U.S. companies cannot predict how future earnings will unfold .
Even if there is some leadership from a daring manager, this points to a painful road to recovery – other than the V-shaped snapback that so many investors are hoping for. Federal Reserve research this month, conducted to understand the impact of the virus-caused effects on earnings, found that companies are more wary of the future than they were during the 2008 financial crisis.
About 42% of US non-financial public companies discuss sharp investment, 27% talk about the size and ability to make equity payments, and 17% focus on downing their lines of credit, economists Andrew Y conclude. Chen and Jie Yang. At the peak of the latest recession, figures were 25%, 11% and 7% respectively.
"The dramatic increase in the number of companies taking these actions indicates that financing problems during the Covid-19 outbreak are even more serious than in 2008," they wrote.
The first quarter results of US major technology companies showed that there is significant uncertainty in the system to provide a clear picture of future growth and profitability.
Historical economic uncertainty
Online e-tail giant Amazon (NASDAQ :), despite the number of items sold on its network having risen most in eight years. with cost increases as it delivers goods amid locks while trying to keep thousands of workers virus-free.
During the earnings call after the April 23 report, the company warned that it could lose $ 1.5 billion in the current quarter. "If you are an Amazon shareholder, you may want to take a seat," said CEO Jeff Bezos.
In light of historical economic uncertainty and its iPhones, Apple (NASDAQ 🙂 declined to project figures for the current quarter. This was the first time since the end of 2003 started to provide concrete revenue guidelines.
Despite the grim economic picture brought about by the virus, some technology companies gained ground as increasing online shopping, social media interaction and cloud tapping strengthened remote workers' lead.
During the quarter, Microsoft (NASDAQ 🙂 reported thanks to the growth in cloud computing, which is also driving sales at both Amazon and Alphabet (NASDAQ :).
Cutting and Cutting Spending Dividends
For old economy businesses, it was all about survival and keeping money. From industrial giants such as Boeing (NYSE 🙂 and General Electric (NYSE 🙂 to airlines and oil producers, managers were convinced that customers will not soon return to the pre-pandemic level of travel and socialization.
In its profit call, Boeing presented a plan to survive the worst downturn in aviation history. This includes a workforce cut of around 10% and slowing production, including for the 787 Dreamliner, which will see production cuts for the third time in consecutive quarters.
Dave Calhoun, CEO of the President, highlighted investors' worst fears and emphasized that the company has the balance sheet strength and access to capital to withstand the pandemic and global recession.
Boeing shares have fallen by 62% this year, the worst decline for any of the 30 listed shares.
Industrial conglomerate General Electric announced in late April that it would suspend its annual dividend of $ 1.52 and share buybacks. It alone expects to save more than $ 1.6 billion on the trimmed dividend.
Energy producers facing catastrophically low prices and one of the most serious demand violations in recent history are trying to weather this recession by cutting budgets and in some cases once again dividing dividends.
Exxon Mobil (NYSE 🙂 published the first in three decades as a Chevron (NYSE 🙂 competitor to the oil industry, indicating that the impact of the coronavirus pandemic may linger on their business for much of 2020.
Exxon will cut $ 10 billion in planned capital expenditures in 2020, a budget cut of 30%. "We have never seen anything like what the world is facing today," said CEO Darren Woods in a Wall Street Journal report.
"Bottom line: It's going to be a challenging summer with a pretty sloppy market."
