As job losses mounted, analysts repeatedly cut
their forecasts for corporate profits. Now, they
say profits for big U.S. companies in the S&P
500 plummeted about 44% from a year earlier.
If they’re right, it would be the steepest drop
since a 69% plunge during the depths of the
Great Recession at the end of 2008, according
to FactSet.
Earnings reporting season gets underway
in earnest on Tuesday, when Delta Air Lines
and several of the country’s biggest banks are
scheduled to release their results.
To see how swiftly the bottom gave out,
consider Delta. When the quarter began in
April, Wall Street was forecasting a loss as fliers
nervous about the new virus increasingly stuck
to the ground. They were looking for a loss of $2
per share.
But by mid-April, TSA checkpoints at airports
were seeing only 5% of the passenger levels of
a year earlier. Now, Wall Street forecasts Delta
lost $4.31 per share for the quarter, a whiplash
turnaround from its profit of $2.35 per share a
year earlier, according to FactSet.
Given the uncertainty created by the pandemic,
many CEOs have abandoned their forecasts for
second-quarter results, which could leave Wall
Street’s estimates more inaccurate than usual.
More than 400 of S&P 500 companies have failed
to provide guidance to analysts for the quarter,
according to Mark Hackett, Nationwide’s chief of
investment research.
Earnings reports tend to matter deeply to
investors because corporate profits are the
lifeblood of the stock market, with prices tending
to track the path of earnings over the long term.