Hard to Think Earnings Analysis Matters at All Now

The SP 500 “earnings yield” jumped to 7.49% this week, with the 15% decline in the SP 500.

Trouble is, the current consensus probably cant be taken seriously.

Coca-Cola came out Thursday night and said that their guidance in late January – early February ’20 has been completely eradicated with C-virus, with the stock falling 21% this week alone.

Here is what Coke said this morning (as related by Breifing.com)

Coca-Cola does not expect to achieve previously indicated full year guidance  (41,83)
  • “As COVID-19 continues to spread and significantly impact various markets around the world, including the United States, the company has put preparedness plans in place at our facilities to ensure continued operations, while also taking all necessary steps to keep our teams healthy and safe. […] We are also working closely with our bottling partners on contingency planning for continuous supply and, at this stage, we do not foresee any near-term disruptions in concentrate or beverage base production.”
  • “Since our last guidance update, local market policies and initiatives to reduce the transmission of COVID-19 have significantly increased. These initiatives include the direction to refrain from dining at restaurants, the cancellation of major sporting and entertainment events, material reduction in travel, the promotion of social distancing and the adoption of work-from-home policies. These initiatives, in combination with […] foreign exchange rates, will have a negative impact on our full year financial and operating results and, therefore, we do not expect to achieve our previously provided full year guidance.”
  • “Due to the speed with which the COVID-19 situation is developing, there is uncertainty around its ultimate impact; therefore, the negative impact on our financial and operating results cannot be reasonably estimated at this time, but the impact could be material. We expect to provide an update during our Q1 2020 earnings release and call.”

Delta Airlines, Macy’s, and a handful of others have already pulled guidance for 2020.

On the flip side, both Walmart (WMT) and Pepsi (PEP) have said they will add 150,000 and 15,000 new employees respectively in 2020. That’s pretty remarkable. Uber came out Thursday night and noted that they had enough capital to ride out the C-virus tumult. Oracle continues to trade above $45 and closed out this week above $45 per share, the high for the stock in March, 2000.

2020’s calendar EPS estimate has fallen to $168.25 per share. Could it fall to $150 – $155 – sure – and probably more.

What will undoubtedly help the SP 500 is Technology’s 25% market cap weight in the SP 500 and Communication Services’ 11% market cap weight, both of which are still expecting high-single-digit EPS growth for 2020 (although this changes every week).

Summary / conclusion: Any kind of earnings analysis seems like more of a guess than anything else. The weekly blog on SP 500 will continue to be posted by take the numbers with a substantial grain of salt until we start to hear actual Q1 ’20 financial results, and hear Q2 ’20 guidance. By that time some aspects of the national shutdown should start to unlock, and readers should know about which companies might not survive this pandemic.

More to come this weekend, and take all opinions with a grain of salt, particularly during these trying times.

Thanks for reading.


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