By Ciara Linnane, MarketWatch , Jaimy Lee
Coronavirus is the dominant theme in earnings releases and on companies' conference calls as investors seek to gauge its impact on corporate results
COVID-19, the disease caused by the new coronavirus that was first identified late last year in Wuhan, China, was a dominant theme in the earnings releases and conference calls of S&P 500 companies in the recent earnings season as investors press for answers on how it will impact their financials.
There are now more than 101,000 cases of the coronavirus and more than 3,400 deaths (link), (link) according to a tally of cases published by the Johns Hopkins Whiting School of Engineering's Centers for Systems Science and Engineering.
With the December earnings season now all but over, many companies are having to review their guidance to incorporate the effect the virus is having on supply chains in Asia, as well as on consumer behavior across the globe. While most companies are still saying it's too early to assess the full impact, many are attempting to offer some evaluation of lost sales or hits to earnings.
This is what companies have been saying:
-- 3M Co. (MMM) said demand for respirators is currently outpacing supply, and that increased demand for respirators during the H1N1 influenza outbreak in 2009 generated $250 million in revenue for the company. "That's maybe the best frame to think about it for coronavirus at this point," CEO Mike Roman said at an investor conference.
-- Abercrombie & Fitch Co. (ANF) expects an adverse impact of $60 million to $80 million on sales this year as a result of the outbreak. It has also lost $4 million "primarily from store closures in mainland China due to the coronavirus." Abercrombie's Asia-Pacific region made up less than 10% of 2019 sales, and its total manufacturing exposure to China was 22% in fiscal 2019. "We've given ourselves some provision I guess I would say on the European tourism business to continue to suffer a little bit as the travel restrictions get more and more intense," CFO Scott Lipesky said during an earnings call, according to a FactSet transcript.
-- Agilent Techonologies Inc. (A) expects earnings of 72 cents to 76 cents a share on revenue of $1.28 billion to $1.32 billion "after factoring in the potential impact" of the coronavirus. The lab instruments maker anticipates a $25 million to $50 million hit in the first half as a result of the virus; a $10 million loss in revenue in the first quarter and an estimated $15 million to $40 million impact in the second quarter. "Our performance was impacted by the extension of the Lunar New Year holiday due to the coronavirus," CFO Robert McMahon said. "This reduced the number of shipping days in China."
Read also:Consumer-facing companies will be the first hit if the coronavirus spreads across the U.S (link).
-- Alcoa Corp. (AA), which makes aluminum products, said it is seeing supply chain bottlenecks in China for bauxite, caustic and coal gas that are lowering production. "It's driving a shortage of alumina inside of China, which is then starting to see the Chinese alumina price increase and you see the knock-on impact in the rest of the world with prices also increasing, pricing up by about $20 per ton over these last few weeks," CEO Roy Harvey told investors.
-- American Airlines Group Inc. (AAL) is reducing international and domestic capacity through the summer peak season as a result of the COVID-19 outbreak. The airline is cutting international capacity by 10%, including a 55% reduction in trans-Pacific capacity. In the U.S., the airline is cutting capacity by 7.5% in April.
-- Analog Devices Inc. (ADI) updated its guidance for second-quarter revenue of $1.35 billion, plus or minus $50 million. "While the effects of the coronavirus are difficult to estimate and the situation remains dynamic, we have reduced our revenue guidance by $70 million to account for its potential impact," the company said in a statement.
-- Apple Inc. (AAPL) is not expecting to meet second-quarter financial guidance because production has slowed or been halted in China due to the COVID-19 outbreak. "Work is starting to resume around the country, but we are experiencing a slower return to normal conditions than we had anticipated," the company said in a statement on Monday. Apple generates about 15% of its revenue from China, and many of its products are manufactured there.
Read also: Apple's coronavirus warning wasn't a total surprise, but magnitude rattles Wall Street (link)
(link)-- Best Buy Inc. (BBY), which sources a lot of its consumer electronics products from China, said it assumes that most of the impact from the coronavirus will happen during the first half of the year. "Therefore, we view this as a relatively short-term disruption that does not impact our long-term strategy and initiatives," Chief Financial Officer Matt Bilunas said in a statement. "Our guidance ranges for both Q1 and the full year reflect our best estimates of the impacts at this time." On the company's earnings call, executives stressed that it was still a fluid situation and they are attempting to gauge when factories will be fully back up and running and whether global vendors have sufficient inventory.
-- Boston Scientific Corp. (BSX), which has a $600 million business in China, is expecting a "negative first-half impact" on expectations that Chinese patients will push back elective medical procedures during the outbreak. The company lowered its quarterly sales guidance for the first quarter of 2020. The device maker now anticipates a "preliminary negative sales impact estimate of $10 million to $40 million."
-- Brown-Forman Corp. (BFA), the parent company of the Jack Daniel's whiskey brand, lowered guidance to reflect global uncertainty and the effect of the coronavirus. The company is now expecting full-year earnings per share of $1.75 to $1.80, below the $1.82 FactSet consensus.
-- Capri Holdings Ltd. (CPRI), which owns luxury brands Jimmy Choo and Versace, said it now expects (link) annual revenue of $5.65 billion and adjusted earnings per share of $4.45 to $4.50 as the virus eats into sales. That's below the FactSet consensus for revenue of $5.78 billion and per-share earnings of $4.87.
Read also:How much will COVID-19 hurt the U.S. economy? It's anyone's guess right now (link)
-- Carnival Corp. (CCL) said there could be a fiscal 2020 earnings-per-share impact of 55 cents to 65 cents if all operations are suspended in Asia through the end of April. If that comes to pass, according to Carnival, there would be a material impact on the business from suspended cruises in Chinese ports; cancellations in other parts of Asia; and the impact on bookings, which is determined by the length of time that an event influences travel.
-- The Coca-Cola Company (KO) said it is still expecting to reach its full-year guidance though COVID-19 will likely weigh on first-quarter results. Coca-Cola said it currently estimates an approximate 2- to 3-point impact to unit case volume, 1- to 2-point impact to organic revenue, and 1- to 2-penny impact to earnings per share for the first quarter. The Chinese market makes up 10% of Coca-Cola's global volume, the company said in January. "China's economy was in a different place when SARS happened," CEO James Quincey said in January. "It's worth noting that China's economy is [now] much bigger, and this could become more connected to the rest of the world." In its 10-K filing with the SEC, the company also said it has seen delays in the production and export of ingredients used in nonnutritive sweeteners. It doesn't expect a hit to its full-year results for now.
-- Crocs Inc. (CROX) expects first-quarter revenue to be hurt by $20 million to $30 million due to disruptions in Asia from the coronavirus. The casual shoe maker said many of its sellers in China remain closed, with those that are open seeing reduced operating hours and traffic, with traffic declines expanding throughout Asia.
-- Delta Air Lines Inc. (DAL) is reducing capacity by 15 points, implementing a hiring freeze, offering voluntary leave, and deferring spending as it struggles with the fallout from the coronavirus. The airline said it is cutting international capacity by 20% to 25% and domestic capacity by 10% to 15%.
-- Dollar General Inc. (DG) is "strongly encouraging" that the first hour of store operations be dedicated solely for senior shoppers, who are the most vulnerable to infection. "Dollar General wants to provide these at-risk customers with the ability to purchase the items they need and want at the beginning of each day to avoid busier and more crowded shopping periods," the company said in a statement.
-- Domino's Pizza Inc.(DPZ) said that fewer than 20 of its stores are closed in China and the outbreak is slowing down the openings of new stores in that market. Last year, Domino's opened 80 net new stores in China.
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