The best and worst companies this earnings season!

May 01, 2020 11:14

Every quarter, stock market traders and investors are on high alerts as companies report their latest earnings. Not only does the market find out just how well - or not - a company is doing, they also find out what the future holds when companies announce their 'forward guidance'.

With the coronavirus decimating parts of the economy, earnings expectations this season were already very low. However, there have been a few surprises, as well as some major red flags. These are discussed below, in the best and worst companies in this earnings season so far. Let's take a look!

Apple

Apple posted earnings of $2.55 per share, beating analyst estimates of $2.26. The company also managed to grow their revenue from the last quarter which surprised many investors as that period included the impact of the Covid-19 pandemic.

While iPhone revenue was down to $28.96 billion, a 7% year-on-year drop, the shortfall was mostly made up by a 16% rise in revenue from its services division. This includes iCloud, Apple Music and other subscription services. As expected, the company gained a lot more viewers in its Apple+ TV subscription.

Unusually, Apple CEO Tim Cook did not give forward guidance for the next quarter due to the historic situation which has just unfolded. Overall though, he was optimistic about the future making Apple shares one of the better performers this earnings season and with its long-term uptrend still intact as shown below:

Source: Admiral Markets MetaTrader 5, #AAPL, Weekly - Data range: from 24 March 2013 to 1 May 2020, accessed on 1 May 2020 at 10:05 am BST. Please note: Past performance is not a reliable indicator of future results.

Amazon

Surprisingly, Amazon reported a miss in earnings. The company reported earnings per share of $5.01 against a Wall Street expectation of $6.25. While the company beat revenue expectations due to the increase in activity in its online deliveries, they announced they plan to spend all of its profits - some $4 billion - on responding to the coronavirus pandemic.

While its share price dropped 5% on the announcement it's one stock that is still trading at all-time high levels. Amazon is also a company that is set to reap the benefits once the lockdown around the world lifts. Investors may just see the company's response as a way to help the company perform better in the future which still makes it a good performer in this earnings season.

The historic uptrend in Amazon's share price still seems intact, as shown below:

Source: Admiral Markets MetaTrader 5, #AMZN, Weekly - Data range: from 10 March 2013 to 1 May 2020, accessed on 1 May 2020 at 10:35 am BST. Please note: Past performance is not a reliable indicator of future results.

You may be seeing a trend develop here already? Pretty much, most of the major technology companies have performed well in this earnings season. This includes:

  • Tesla: Earnings per share of $2.14 against an expected $1.72, with a profit of $16 million.
  • Alphabet: Earnings per share of $9.87 missed estimates but revenue grew by 13% topping estimates.
  • Facebook: Earnings per share of $1.71 missed estimates of $1.74 per share. However, revenue grew by 17% and users are up 10%.

It's probably no surprise that some of the worst performers this earnings season are major industrial companies from the energy and travel sector. Let's take a look at a few below:

Royal Dutch Shell

Shares in Royal Dutch Shell were among the worst hit as the company decided to cut its dividend for the first time since World War II. While many companies have cut dividend payments to shareholders this season, the decision from Shell is a major red flag to long-term income investors as they have been an industry leader in paying dividends to shareholders.

First quarter profit fell by a whopping 46%, helping the shares to sell-off 7% on the announcement. The energy sector has been hit the hardest due to oil prices crashing lower and a collapse in demand all around the world. The historic fall in its share price says it all:

Source: Admiral Markets MetaTrader 5, #RDSA, Weekly - Data range: from 24 March 2013 to 1 May 2020, accessed on 1 May 2020 at 10:55 am BST. Please note: Past performance is not a reliable indicator of future results.

International Consolidated Airlines Group

British Airways owner (IAG), announced the severe challenges facing the group which could see them cut 12,000 jobs. The company announced a record quarterly loss of €523 million after revenues dropped to 13%. With passenger numbers falling a record 94%, lower revenue seems to be on the horizon for the future.

The airline has not only been hit by a lack of consumer travel but business travel has also plunged as companies look to online meetings provided technology platforms like Zoom. Airlines around the world have been asking governments for a bailout.

US airlines like American Airlines, Delta Airlines and others have already received $25 billion of taxpayer money. France and the Netherlands may follow suit with an €11 billion bailout of Air-France KLM.

So far, IAG has decided not to go down the bailout route, potentially leading to further downside in its share price which has already been battered in recent months, as the long-term monthly chart shows below:

Source: Admiral Markets MetaTrader 5, #IAG, Monthly - Data range: from 1 January 1990 to 1 May 2020, accessed on 1 May 2020 at 11:05 am BST. Please note: Past performance is not a reliable indicator of future results.

There you have it, some of the best and worst performers during this earnings season so far. It's clear that some sectors are performing better than others. The question is which sectors and companies will you be focusing on?

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