Earnings in a Pandemic

Tomorrow kicks off what's sure to be an unusual earnings season. JPMorgan Chase and Wells Fargo both report first-quarter results in the morning.

Of course, much of what companies will have to say in the coming weeks applies to the period before the country was shut down. The coronavirus closings began in mid-March, by which point the first quarter was nearly over. That will make earnings numbers immediately obsolete. Management teams will surely do their best to provide color about the current quarter. Some may update their forecasts, but many will pull them altogether. 

Nicholas Jasinski has written that investors will need new tools to digest the coming deluge of commentary. One fund manager, Matthew Moberg who runs the $10 billion Franklin DynaTech fund, told Nick: “I don’t think pulling guidance is necessarily a negative thing right now, because anybody who says they have a really clear view on how this virus is going to impact the economy is probably overconfident.”

This quote from Ted Bridges of Bridges Investment Management really got my attention:

It’ll be a lot of listening for adverbs and adjectives and tone that describe a mindset around how those companies are going to operate over the next several quarters.

As a writer, I like adverbs and adjectives, but it could be foreign territory for some investors, who are used to comparing their models against numerical guidance.

As for the first quarter, analysts now expect a 10% decline in aggregate earnings from companies in the S&P 500. On Jan. 1, those same analysts saw 6% growth, according to data from Refinitiv. And a year ago, they were counting on a 15% gain. Times have changed.  

You can read Nick's earnings preview here.