Worst Yet to Come for Airlines, Sneakers and Beer: Earnings Wrap
Worst Yet to Come for Airlines, Sneakers and Beer: Earnings Wrap
Bloomberg | May 07, 2020 08:45
(Bloomberg) -- Earnings season in Europe began winding down, with companies predicting that customers may not return to pre-pandemic levels of traveling and socializing any time soon.
Air France-KLM said capacity will drop 95% in the second quarter and the impact of the outbreak could be felt for years, while British Airways owner IAG (LON:) SA predicted air travel demand won’t return to pre-pandemic levels before 2023.
Anheuser-Busch InBev NV, the last of the major brewers to report first-quarter results, said sales have been plagued by shut restaurants and bars and that the second quarter will only get worse. Sneaker-maker Puma SE had a similar message, with sales running about 50% lower this quarter.
But customers are still shopping from home. German online fashion retailer Zalando SE said revenue may increase 10% to 20% this year as consumers buy more online.
Two-thirds of European companies have reported first-quarter results, and profits are down 25%, JPMorgan Chase (NYSE:) & Co. strategists said in a note published before Thursday’s earnings releases.
- European stocks opened higher, with the Index rising 0.5% on gains for basic resources, retail and real estate shares.
- AB InBev Warns Second Quarter Will Be Much Worst Than First
- British Airways Parent IAG Taps U.K. Funds to Survive Long Slump
- For more on dividends, click here. For the latest company guidance, click here
- U.K. May Ease Lockdown Monday; Poland Delays Vote: Virus Update
Here’s the top virus-related earnings news for today by sector.
Food & Beverage
- Profit at AB InBev, the world’s largest brewer, fell by 14% in the first quarter as the company began to suffer the impact from bar and restaurant closures from lockdowns that were implemented late in the period. The Budweiser maker expects performance in the second quarter to be “materially worse,” with global volumes in April having declined by almost a third compared with the same month last year. Jefferies (NYSE:) said the quarter was broadly in line but weak in Asia. The shares jumped 2.7%.
Travel & Leisure
- IAG, which also owns Spanish carrier Iberia, said it doesn’t anticipate air travel demand will return to 2019 levels before 2023 but said it’s planning a meaningful return to service in July. It will access the U.K. government’s Covid-19 funding program and will slash its capital spending plans for this year. The shares were little changed after an initial bounce of 3.7%.
- Air France-KLM warned demand for air travel will take several years to recover, scrapping its full-year outlook and forecasting a “significantly higher” loss in the second quarter than in the first three months of the year. The carrier expects capacity to remain skeletal, down 95% this quarter and 80% lower in the third quarter as travel slowly starts to resume during summer months. The shares fell 3.5%.
- Hotel operator InterContinental Hotels Group Plc said its comparable revenue per room for the first quarter fell by 25%, with a 55% drop in March and April expected to see a drop of about 80%. The company anticipates continued disruption to travel patterns in coming months and that visibility on its outlook is limited. The shares fell 0.3%.
Metals & Mining
- ArcelorMittal (NYSE:) SA pulled its forecasts and will suspend dividend payments as it said it expects steel shipments for 2020 to fall year-on-year. The steelmaker’s first-quarter sales slumped and missed consensus and the company reported an operating loss for the first three months. The shares bounced 4.1% at the open.
- Rolls-Royce Holdings Plc (LON:) slashed its forecast for wide-body engine production by 44% this year and pledged greater cost savings to cope with an effective grounding of the global airline industry. The British engine maker now plans to produce 250 wide-body power plants in 2020, while aircraft powered by its turbines logged a 90% drop in flying hours last month -- hurting maintenance revenue. Jefferies said the company can “ride it out” even if first-half cash flow may look “ghastly.” The shares dropped 4%.
- Swedish appliances manufacturer Electrolux AB surprised the market with an operating profit in the first quarter, after analysts had predicted the home appliance maker would post a loss. April sales slumped about 30%, but are expected to gradually recover. However, Electrolux now sees declining full-year demand in all markets. Morgan Stanley (NYSE:) said the update was “solid enough.” The shares fell 2.4%.
- Switches and sockets maker Legrand SA (PA:) reported sales in April slumped by 41% and it expects a marked fall for the second quarter before an improvement in the second half. First-quarter operating profit and revenue declined for the French firm. The shares dipped 1.3%.
- BT Group (LON:) Plc scrapped its dividend payouts for two years to free up funds for a national fiber network rollout under the cloud of the virus. The U.K. telecommunications group said it would suspend its final dividend for its 2020 fiscal year and said payouts will be reset at half their current level when they resume. The shares plunged as much as 12%.
- Telefonica (NYSE:) SA withdrew financial guidance for 2020 and said it would offer to pay part of this year’s dividend in shares, as it balances uncertainty about the near-term circumstances with future growth potential. The Spanish phone carrier’s first-quarter sales were hit by significant currency depreciation in its sprawling Latin American operations, particularly Brazil, its second-biggest market. The numbers are likely to be overshadowed by confirmation that Telefonica’s O2 unit in the U.K. will merge with Liberty Global (NASDAQ:) Plc’s Virgin Media business. The shares opened 3.2% higher.
- German broadcaster ProSiebenSat.1 Media SE said it can’t provide a reliable outlook for the year as it reported a small rise in first-quarter revenue. The group had already withdrawn its outlook and scrapped its 2019 dividend owing to the lack of visibility caused by the pandemic. The shares rose 1.5%.
- Online clothing retailer Zalando said it anticipates its full-year revenue growth will outpace market expectations as it reported a first-quarter loss but said it has seen more new customers coming to its platform. It said demand started to recover in April. RBC said the update points to massive potential consensus upgrades. The shares bounced 11%.
- German sportswear group Puma said the second quarter is going to be worse than the first as it said Covid-19 is crushing sales. The group said it’s generating around half of normal revenue and can’t provide an outlook for the rest of the year, though it does expect a return to growth in 2021. The shares rose 1.1%.
- Royal Ahold Delhaize (OTC:) NV said net sales for the first quarter rose 15%, boosted by stockpiling in Europe and the U.S., with the adjusted operating margin of 5.3% beating consensus analyst estimates. The food retailer kept its full-year outlook and commited to its dividend and buyback policies. Berenberg said the quarter was “substantially ahead” of expectations and the shares rose 0.9%.
- German food wholesaler Metro AG said trading has been “significantly negatively affected” by the virus since mid-March, with stockpiling initially helping to offset a fall in sales from hotel, restaurant and catering companies. It expects every month of the lockdown will cause sales to fall by 2% compared to the year prior. The shares fell 3.8%.
- Natixis SA joined its French peers in reporting a heavy hit on equities trading revenue from market turmoil and canceled dividends. The lenders said its equities trading revenue was wiped out by payouts being pulled, but its debt trading revenue topped rivals BNP Paribas (OTC:) SA and Societe Generale (OTC:) SA. The shares rose 2.6%.
- Nutritional products and materials maker Royal DSM NV reported a small fall in first-quarter earnings. It still anticipates a rise in earnings for its nutrition arm in 2020 but said conditions for its materials business deteriorated rapidly at the end of the first quarter. The company suspended its 2020 outlook after a sudden drop in demand for plastics as manufacturing came to a virtual standstill in Europe and North America. The shares rose 2.9%.
- Specialty chemicals firm Evonik Industries AG cut its full-year earnings forecast and reported a decline in first-quarter sales. The company said the economic impact of the Covid-19 epidemic has become clearer in the second quarter. Evonik is sticking to its plan to pay a dividend on 2019 earnings. The shares fell 3.2%.
- HeidelbergCement (DE:) AG cut its 2019 dividend pledge by almost 75% and said construction halts to contain the coronavirus will have hurt full-year results. The German cement maker said it’s making good progress reducing costs to navigate the crisis, and is on track to hit a 1-billion-euro savings target. First-quarter sales fell 7.3%. The shares rose by 0.4%.
- Munich Re AG’s first-quarter net dropped by 65% and it abandoned its full-year profit forecast. The reinsurer booked coronavirus-related losses of 800 million euros for the quarter. The shares rose 0.4%.
- Research tools makers Qiagen (NYSE:) NV’s first-quarter earnings rose and it anticipates a stronger second quarter based on current trends. It has benefited from significant demand for products used in Covid-19 testing, including viral RNA extraction kits, CEO Thierry Bernard said in a statement. The firm had already flagged expectations for second-quarter sales growth. The shares fell by 0.5%.
- Genmab (NASDAQ:) A/S said its earnings and sales slightly topped consensus for the first three months and confirmed its 2020 outlook. The biotechnology firm, which makes antibody therapies for cancer treatment, said net sales of its Darzalex product jumped 49% in the quarter. The shares rose 3.4%.
- Equinor ASA’s first-quarter profit fell by 63% amid the slump in oil prices, two weeks after it became the first European oil major to pull its dividend. The Norwegian firm pulled its 2020 production guidance amid the slump in crude demand caused by virus shutdowns. The shares were up 0.9%.
- Liquefied petroleum gas distributor Rubis SCA said its first-quarter revenue rose by 19% but said Covid-19 had begun to hurt volumes toward the end of the period. It expects a fall in fuel product list prices to help margins, which should offset any near-term negative inventory effects. The shares bounced 5.3%.
- Italian electricity and gas group Enel (MI:) SpA posted first-quarter earnings ahead of expectations and confirmed its full-year targets, saying it does not anticipate a significant impact from Covid-19. The shares rose 1.3%.
- Continental AG (OTC:) will slash investments by at least 20% this year as the German car-parts giant expects results to decline further in 2Q. Revenue and profit are forecast to fall “significantly” in 2020.
- French motor homes and trailers manufacturer Trigano SA’s first-half profit missed expectations. It said productivity has been resuming gradually since mid-April, and that almost all sites should be operating from mid-May, though the company expects to be hurt by the novel coronavirus crisis in the second part of the year. The shares fell 4%.
- Cyclical stocks could have further to fall against their defensive counterparts as any sustained improvement in the global economy seems “way off,” according to Citigroup (NYSE:) strategists.
- Equity and bond markets are sending conflicting signals about the outlook for an economic recovery and stock investors may be wise to take note from their more cautious counterparts, according to Invesco’s global market strategist.
- The global recovery for stocks since March may fizzle out as investors become more realistic about the corporate earnings outlook and start to price in the permanent damage Covid-19 will do to the economy, according to Janus Henderson Group (NYSE:) Plc.
- U.S. investors have been piling into cash amid the uncertainty about the virus impact but should consider diversifying into riskier assets like lower-quality stocks or credit, UBS Global Wealth Management says.
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Written By: Bloomberg