earnings Tesla

Tesla’s prayer for profit, earnings tests for Intel and Microsoft highlight first big week of coronavirus-tainted earnings – MarketWatch

Earnings Watch

Earnings Watch: S&P 500 profits have plunged 47% so far this reporting season, and it isn’t expected to get much better

This earnings reporting season is so far living up to expectations that it will be the worst since the depths of the 2008 financial crisis, but a number of big names could offer some better news in the week ahead.

Tesla Inc.
Microsoft Corp.
and Intel Corp.

highlight a busy slate of earnings reports as the pace picks up. Eight Dow Jones Industrial Average

components are set to deliver numbers in the coming week, along with 80 members of the S&P 500 index

So far, the results have been dismal. S&P 500 components have posted a 47.4% decline in second-quarter profits with nearly 9% of reports issued. Analysts model a 44% earnings decline for the index as a whole, taking into account already-reported results and estimates for the rest. That would mark the sharpest year-over-year dip in earnings since the fourth quarter of 2008, when profits plunged 70%.

See more: S&P 500 earnings set to plunge as the coronavirus batters all sectors — with Wall Street counting on a bounce that may not come

Tech giants Intel and Microsoft are on a better trajectory as both likely benefited from stay-home trends during the coronavirus pandemic that drove greater demand for remote-work services and equipment and are expected to eke out per-share earnings growth while posting slight dips in net income. Positive surprises could help the S&P 500’s aggregate performance, since larger companies are more heavily weighed in the index. Microsoft reports results Wednesday afternoon and Intel follows a day later.

Tesla is expected to show red ink for the second quarter, according to FactSet estimates, though analysts predict a narrower loss than a year ago. Some are still holding out hope that the company can post a surprise GAAP profit and help land Tesla in the S&P 500, which requires four straight quarters of profitability for entry; Tesla has been profitable the past three quarters.

Other key names in the week to come include battered airlines United Airlines Holdings Inc.

and Southwest Airlines Co.
social-media players Twitter Inc.

and Snap Inc.
as well as Chipotle Mexican Grill Inc.

Here are some themes to watch.

Tesla’s next test

Tesla crushed second-quarter delivery expectations, providing more ammunition to the stock’s strong 2020 rally, and now the company faces another test as it reveals the financial impact of COVID-19 on its business.

Read: Tesla’s earnings on tap next week. Will a loss end its blowout stock rally?

The upbeat delivery numbers suggest that consensus financial forecasts might be too conservative, Barclays analyst Brian Johnson wrote. He was already predicting a $4.2 million GAAP profit before the delivery announcement and brought his estimate up to $42 million since. The FactSet consensus currently calls for a $53 million loss.

Phone calls

AT&T Inc.

and Verizon Communications Inc.

are set to show how smartphone-buying trends have evolved during the pandemic. Both companies saw equipment revenue tank toward the end of the March quarter as stores closed due to COVID-19, but analysts are optimistic that things are picking back up now that social-distancing restrictions have eased.

Even with these challenges, the wireless business should remain a bright spot for AT&T, which is dealing with film production halts for its Warner Bros. business, advertising weakness for its media channels, and an avalanche of cord-cutting at DirecTV. AT&T’s numbers are due up Thursday morning, followed by Verizon the next day.

Flight risk

After Delta Air Lines Inc.

delivered a $5.72 billion loss for the June quarter and warned that a “sustainable recovery” seems to be more than two years away, United and Southwest are on deck.

United’s comments will be especially worth watching for as Cowen & Co.’s Helane Becker said that the company has been “the most forthcoming with information regarding the reality of the pandemic” and “more right than wrong” during the crisis. She’ll be looking for information on planned staff reductions and capacity changes. “United has been the most somber about the situation and their capacity plans have mimicked that,” Becker said. Earnings are due out Tuesday afternoon with a call the following morning.

For Southwest on Thursday morning, Becker is interested to see whether the company will use the downturn as an opportunity to gain share as it has in the past.

Social studies

Twitter is set to face investors Thursday morning, just more than a week after the company suffered a troubling security breach that allowed hackers access to numerous prominent Twitter accounts for what seemed to be a bitcoin scam. The company is still investigating the incident and management is sure to face tough questions about Twitter’s privacy and security mechanisms. Stifel’s John Egbert expects Twitter to dial up its security spending even more.

Twitter and Snap should shed light on the state of the ad market during the pandemic. Egbert predicts that Snap’s revenue growth decelerated from the first quarter to the second quarter, but he’s still looking for double-digit ad growth relative to a year ago given the “growing appetite” for Snap’s direct-response ads. Snap reports Tuesday afternoon, followed by Twitter on Thursday morning.

Food for thought

As some states take a tougher stance on indoor dining, Chipotle will look to emphasize its digital prowess Wednesday afternoon. Third-party data on app downloads and loyalty sign-ups suggest a “longer-term uptick in share,” wrote Bank of America’s Gregory Francfort. He said the company seems to be “managing through COVID better than we expected” though he still worries about the economics of delivery.

A whole week of the Dow

There’s at least one Dow component on the schedule every day in the week ahead, starting with International Business Machines Corp.

Monday afternoon, Coca-Cola Co.

Tuesday morning, and Microsoft on Wednesday afternoon. Travelers Cos. Inc.

and Dow Inc.

follow Thursday morning, with Intel that afternoon, and American Express Co.

and Verizon round out the week Friday morning.

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Buy's earnings

Best Buy’s earnings fall in first quarter, after initial sales surge during pandemic – CNBC

David Paul Morris | Bloomberg | Getty Images

Best Buy said Thursday its revenue and earnings fell in the first quarter, despite an initial surge of shopping as customers set up their home offices and prepared for kids to attend school remotely during the pandemic.

The retailer’s sales were also affected later in the quarter, as it decided to shut stores to customers and switch to only curbside pickup outside of them. It also temporarily suspended all in-home installations and repairs.

Best Buy shares fell about 2% in premarket trading Thursday.  

CEO Corie Barry touted the company’s ability to adapt and keep serving customers, even as it restricted access to its stores. She said it retained about 81% of last year’s sales during the last six weeks of the quarter “even though not a single customer set foot in our stores.”

“The strong sales retention is a testament to the strength of our multi-channel capabilities and the strategic investments we have been making over the past several years,” she said in a news release.

Online sales shot up in the U.S. by 154.4% from a year earlier, but that became the only way for customers to shop at Best Buy.

Here’s what Best Buy reported for the first quarter ended May 2:

  • Earnings per share: 67 cents, adjusted
  • Revenue: $8.56 billion
  • Same-store sales: down 5.3%

Best Buy said first-quarter net income fell to $159 million, or 61 cents per share, from $265 million, or 98 cents per share, a year earlier. Excluding items, Best Buy earned 67 cents per share. Analysts were expecting Best Buy would earn 44 cents per share, according to Refinitiv. 

The company’s revenue fell to $8.56 billion, from $9.14 billion a year earlier, beating analysts’ estimate of $8.16 billion.

Best Buy’s same-store sales were down 5.3%. Analysts estimated same-store sales would drop by 10%. 

Domestic same-store sales were down 5.7%. International same-store sales were down 0.2%.

The retailer had a wave of sales early in the coronavirus pandemic, as customers bought kitchen appliances, computer monitors and other items to help them work, cook and learn during long stays at home.

In mid-March, Best Buy withdrew its fiscal 2021 financial outlook. It also drew the full amount of its $1.25 billion revolving credit facility and suspended all share buybacks.

Chief Financial Officer Matt Bilunas said Thursday the company isn’t providing guidance because of uncertainty around Covid-19.

“We remain thoughtful about managing our profitability and liquidity, balancing our short-term decisions to navigate this unprecedented situation while preserving the elements of our strategy that will ensure we remain a vibrant company in the future,” he said in a news release.

The company shut its stores to customers in late March, but continued to sell online and offer curbside pickup. In mid-April, however, Barry said the company would furlough about 51,000 employees and take other cost-cutting measures. 

Best Buy began to reopen some of its stores to customers in early May, but only by appointment. Its employees have stepped up safety measures, including wearing masks and gloves, escorting each customer at a social distance and wiping down everything the customer touches.

Read the full press release here.

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