The S&P 500 “earnings yield” jumped to 7.49% this week, with the 15% decline in the S&P 500.
The trouble is, the current consensus probably can't be taken seriously.
Coca-Cola (NYSE:KO) 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 (as related by Breifing.com):
“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 (NYSE:DAL), Macy’s (NYSE:M), and a handful of others have already pulled guidance for 2020.
On the flip side, both Walmart (NYSE:WMT) and PepsiCo (NASDAQ:PEP) have said they will add 150,000 and 15,000 new employees respectively in 2020. That’s pretty remarkable. Uber (NYSE:UBER) came out Thursday night and noted that they had enough capital to ride out the C-virus tumult. Oracle (NYSE:ORCL) continues to trade above $45 and closed out this week above $45 per share, the high for the stock in March 2000.
2020s 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 S&P 500 is Technology’s 25% market cap weight in the S&P 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 S&P 500 will continue to be posted by taking 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.