(Bloomberg) — Volkswagen AG forecast a severe drop in earnings this year and IAG SA will slash the workforce at British Airways by almost 30% as the corporate fallout from the coronavirus pandemic worsens.
Two weeks into Europe’s first-quarter earnings season, more companies are cutting jobs and throwing up their hands over future guidance. Airbus SE burned through 8 billion euros ($8.7 billion) in cash last quarter, while advertiser WPP Plc said revenue fell as much as 30% in some regions.
Not all industries are suffering the same fate. AstraZeneca Plc’s earnings topped estimates as demand for its medicines held up. Supermarket giant Carrefour SA had an increase in revenue as consumers stockpiled food and ordered online during lockdowns.
Barclays Plc and Standard Chartered Plc set aside piles of cash for troubled loans, but benefited from a boom in trading fueled by volatile markets.
Based on results through Tuesday, earnings for European companies are headed for a drop of 30% in the quarter, according to Morgan Stanley, which said expectations are similar for the second and third quarters as well. Financial, commodity and industrial companies are showing the biggest decline in profit, while health care is holding up the best.
That outlook seems to already be reflected in the stock market, with the Stoxx Europe 600 Index down 18% this year after plunging from mid-February through mid-March, then recovering almost half the losses. The index was little changed in early trading Wednesday.
European stocks opened higher, rising 0.2% on gains for oil and bank shares, with health care and utilities lower.Airbus Says It Burned Through $8.7 Billion in First QuarterDeutsche Bank Trading Beats Estimates While Trailing Wall StreetFor more on dividends, click here. For the latest company guidance, click here.U.S. Cases Top 1 Million; Tokyo Seeks Extension: Virus Update
Here’s the top virus-related earnings news for today by sector.
Airbus CEO Guillaume Faury said the plane maker is navigating through the “gravest crisis the aerospace industry has ever known” as the group said it burned through $8.7 billion in cash in the first quarter. It swung to a net loss in the first three months and said it’s still grappling with the implications of the pandemic and so can’t provide a full-year outlook. Citi said the results were “somewhat of a relief” and shares bounced 3.9% at the open.Lock manufacturer Assa Abloy AB said sales and operating margins in coming months will be lower than in the first quarter assuming demand in its core markets continues to face the negative impact from Covid-19 already seen. The shares fell 3.1%.Krones AG revenue fell 4.2% in the first quarter, with order intake down 19% year-on-year. Economic uncertainties have significantly affected customers’ investment confidence regarding new projects, especially since March, the maker of packaging robots said. Shares rose 3.1%.
Travel & Leisure
IAG said it will cut almost 30% of its workforce at British Airways amid a downturn in the airline industry that could last for years. The group lost money in the first quarter and said its results are likely to be “significantly worse” in the near term owing to the huge hit to passenger demand the pandemic has delivered. The results missed expectations but its liquidity is reassuring, Bernstein said. The shares dropped 6.8%.Spanish airport operator Aena SME SA’s first-quarter earnings fell by 75% as lockdown restrictions severely curtailed the use of airports worldwide. It’s very difficult to provide any outlook on earnings or on potential passenger traffic, Aena said. Shares rose 0.4%.
Deutsche Bank AG’s traders posted their second straight quarter of double-digit gains as they benefited from frenetic buying and selling across Wall Street amid the onset of the coronavirus pandemic. Revenue rose 13%, beating estimates but falling short of the 31% average gain for the largest U.S. banks. Germany’s biggest lender had published some of its results on Sunday, reporting better-than-expected profit and revenue while setting aside 506 million euros to deal with souring loans. Shares rose by 2.6%.You can follow the live blog for Deutsche Bank’s earnings here.A blockbuster quarter for Barclays’ traders was overshadowed by a 2.1 billion pound ($2.6 billion) bad-loan charge stemming from the coronavirus pandemic. The securities division reported a 77% jump in first-quarter trading revenue to 2.4 billion pounds as the virus whipsawed markets, beating the average 30% gain at U.S. peers. However, the lender set aside funds to cover defaults across the economy and joined its peers in warning of tough times ahead. Citi said it anticipates consensus will fall after the results. Shares jumped 5.2% at the open.Standard Chartered joined other lenders in setting aside money to cover potential losses from problem loans as it reported a 12% fall in underlying first-quarter earnings. The $956 million provision is the biggest for the bank since 2015. Morgan Stanley said the update looks “solid.” Shares were up 6.8% in early trade.You can follow the live blog for Standard Chartered and Barclays earnings here.Nordea Bank Abp posted a jump in credit impairments that was less than analysts predicted and maintained its long-term plans. First-quarter net interest income rose by 5%. Peer SEB AB reported credit losses for the first three months higher than estimates and said the full-year outlook for credit losses is highly uncertain. Nordea shares rose 3.6% at the open, with SEB up 0.8%.
Daimler AG said its first-quarter earnings dropped by 78% and that unit sales, revenue and profit for 2020 will all decline year-on-year. It has started to ramp up production again but said Western Europe demand has slumped following a 45% decline in Chinese demand in the first three months. Analysts said the Mercedes-Benz unit outperformed. Shares were up 1.3% at the open.Volkswagen expects profit to drop “severely” this year after the coronavirus pandemic forced factory stoppages and hit demand in key sales markets from China to the U.S. The carmaker still expects to report an operating profit and has taken steps to cut spending. The shares rose 2.8%.
AstraZeneca maintained its earnings outlook for the year as sales of key drugs advanced and manufacturing in China returned to full capacity. Profit will increase at a mid- to high-teens percentage this year, in spite of the business environment caused by the pandemic. Demand for three cancer medicines helped it report better-than-expected results for the first quarter. Two of the company’s drugs are being tested against Covid-19 as part of a U.K. government effort to fast-track therapies. Goldman Sachs said the numbers will likely please investors and shares rose as much as 2.6% to touch a record high.Hearing aid maker GN Store Nord A/S posted a rise in first-quarter revenue amid a mixed performance in its units. Its hearing aids divisions was hit by Covid-19 but its audio division saw a big rise in sales on demand for home office products. Bernstein said the second-quarter will be “very difficult” for the hearing aids unit. Shares fell by 4.3% at the open.
Remy Cointreau SA’s sales fell 25% in the three months through March, slightly better than analysts expected for the cognac maker’s fiscal fourth quarter. The company said full-year profit dropped about 25% on an organic basis, which is the better end of its forecasted range. Sales may fall as much as 55% in the current quarter, and the company said it opened two production sites in France in the past two weeks, anticipating a very gradual recovery in the second quarter, which starts in July. Jefferies said the update is “fine” but destocking may be a risk. Shares fell by 0.8%.
U.K. clothing retailer Next Plc suspended its dividend and secured extra financing after its full-price sales fell 41% in the first quarter. It said the retail sector and wider economy had “slowed faster and more steeply than we expected in March.” However, it said the measures taken to conserve cash meant that even if full-price sales dropped by 40% for the full year the company “can operate comfortably within its cash resources.” The revised stress tests for the company “paint a very bleak profit picture,” Morgan Stanley said. Shares dropped by as much as 6.5%.Carrefour SA’s first-quarter sales were slightly above consensus expectations as the pandemic boosted sales of groceries in European countries such as France and Spain, as well as in Latin America. The retailer said clients have been favoring supermarkets, convenience stores and e-commerce over hypermarkets since the beginning of lockdown, a trend similar to that reported by domestic peer Casino Guichard-Perrachon SA last week. Sales were strong but offset by higher costs, while Carrefour’s reliance on hypermarkets is a “drawback,” Bernstein said. Shares rose by as much as 4.1%.French household appliances retailer SEB SA said first-quarter like-for-like sales fell by 17%, and the second quarter will face a considerable impact from the lockdown. The firm is good shape to recover in the second-half but the first-half will be tough, Citi said. Shares fell by 1.3%.
WPP said revenue fell by as much as 30% in some regions in the first quarter and it anticipates the impact on its business will worsen in the short-term. The advertising giant said like-for-like revenue less pass-through costs fell by 7.9% in March and senior staff will take pay cuts to protect the bottom line. Goldman Sachs said the update is better than expected, with a solid performance in the U.S., and the shares rose as much as 3.3%.AMS AG, which makes laser components for the iPhone’s facial recognition system, forecast a limited impact due to the coronavirus, as the smartphone manufacturer won contracts for new camera features. The Austrian tech group still expects the takeover of German lighting group Osram Licht AG to close in the second quarter. Analysts said the outlook for the firm looks surprisingly strong and shares surged 15%.Broadcaster Metropole Television SA said activity in the French advertising market remained at a standstill in April amid lockdown measures and it anticipates advertising trends will be greatly disrupted through to the end of the restrictions. It has suspended its dividend and intends to make cost cuts to offset the revenue decline it faces. Shares fell by 3.2%.
DWS Group, the asset manager majority-owned by Deutsche Bank, suffered 2.5 billion euros of outflows in the three months through March, the first quarterly withdrawals in more than a year. Still, that was lower than the 6.4 billion euros predicted by analysts. Coupled with poor investment performance as the coronavirus upended markets, the exodus helped drag assets under management down to 700 billion euros. The firm also said adjusted revenues and costs for 2020 would fall below this year’s figures. Shares rose 1.8%.
Industrial enzymes maker Novozymes A/S said its full-year sales outlook remains “largely intact,” albeit with higher volatility, as it reported flat first-quarter revenue. It said it has been able to meet customer demand despite disruptions caused by Covid-19. The shares opened 4% higher.Polymers and plastics maker Covestro AG maintained its full-year forecast despite earnings falling by 75% in the first quarter on a decline in sales. It is cutting its investment plans and raising its cost-cutting effort to cope with the turmoil. The shares rose by 2%.
Orsted A/S, the world’s biggest developer of offshore wind farms, gave a sign that green power generators will emerge from the crisis relatively unscathed. The Danish firm maintained its earnings guidance for the year in its first-quarter update to the market and said it still plans to invest as much as 32 billion Danish kroner ($4.7 billion) this year. Shares rose 1%.Iberdrola SA, Spain’s largest power company, reaffirmed its guidance for high-single-digit profit growth in 2020, shrugging off concerns over the economic impact of the coronavirus pandemic. The company said it benefited from strong performances at its liberalized and renewable units, which compensated for weakness at the regulated business unit. Shares fell by 0.8%.Rival Spanish utility Naturgy Energy Group SA is seeking to cut the cost of its gas supplies by activating price reviews of its “procurement contracts in view of the current environment,” after recording a 42% drop in net income in the first quarter. The company reiterated that it’s unable to offer guidance for 2020, but maintained its dividend. The shares fell by 0.7%.
Metals & Mining
Precious metals miner Fresnillo Plc reported lower silver and gold production for the first quarter, down 4% and 16%, respectively, against the previous quarter, mostly due to lower volumes of ore processed. The miner said it will keep its full-year guidance under constant review but is well funded with sufficient cash balance to withstand any temporary disruption. Shares rose by 2%.Aluminum supplier Norsk Hydro ASA reported first-quarter earnings that topped expectations. Citi said the beat was driven by a better production performance, lower costs and currency effects and that the second quarter looks uncertain. The stock bounced as much as 8.3% at the open.
Mall landlord Klepierre SA withdrew its guidance and said gross rental income fell by 4.5% in the first quarter. It said its liquidity position remains strong and that it is continuing talks on the sale of some non-core assets. Shares rose 0.3%.U.K. homebuilder Persimmon Plc has a current forward sales position of 2.4 billion pounds for 2020 to date versus 2019’s 2.7 billion pounds, while selling prices remain firm. The company has 600 million pounds of cash and has no plans to seek government funds or furlough staff. The shares fell by 0.4%.
Cleaning firm Elis SA said it anticipates a “sharp” decline in activity in the second quarter, forecasting organic revenue will decline by 40% in April. It said the hospitality business has virtually stopped, got a waiver on its bank covenants and has scrapped its dividend. Shares jumped as much as 12%.Call center operator Teleperformance SA also expects a fall in business activity in the second quarter and has launched a cost cutting program. First-quarter revenue grew 6.2% on a like-for-like basis. Shares opened 8.4% higher.
Goldman Sachs strategists said the companies that can outperform in the next market cycle have strong balance sheets, low volatility growth and good dividend yields. It has called them GRANOLAS.The majority of the world’s richest investors are waiting for stocks to drop further before they start buying again amid concerns about the impact the virus will have on the global economy, according to a UBS Global Wealth Management poll.
For more articles like this, please visit us at bloomberg.com
Subscribe now to stay ahead with the most trusted business news source.
©2020 Bloomberg L.P.