Are S&P 500 Companies Quantifying the Financial Impact of Coronavirus in Guidance?

During each corporate earnings season, it is not unusual for companies to comment on subjects that had an impact on their earnings and revenues in a given quarter or may have an impact on earnings and revenues in future quarters. Given the sharp declines in the stock market in recent weeks as numerous industries have shut down or virtually shut down due to the coronavirus, have companies in the S&P 500 commented on the impact of the coronavirus during their quarterly earnings conference calls over the past few months?

To answer this question, FactSet searched for the words “coronavirus” and “COVID-19” in the conference call transcripts of the 479 S&P 500 companies that conducted quarterly earnings conference calls from January 1 through March 18. Of these 479 companies, 213 (44%) cited either the term “coronavirus” or “COVID-19” during the call. At the sector level, the Consumer Discretionary (39), Information Technology (39),  Industrials (35), and Health Care (34) sectors had the highest number of companies discussing “coronavirus” or “COVID-19” on quarterly earnings calls.

For the 213 companies that discussed “coronavirus” or “COVID-19” on their quarterly earnings calls, the average revenue exposure to China is 6.0%. For all S&P 500 companies, the average revenue exposure to China is 4.2%.

While many of these 213 companies discussed the current negative impact or the potential future negative impact of the coronavirus on their businesses, 76 companies (36%) stated during their quarterly earnings call that it was too early (or difficult) to quantify the financial impact or were not including any impact from the coronavirus in their guidance for the current quarter or current year. On the other hand, 58 companies (27%) included some impact from the coronavirus in their guidance or modified guidance in some capacity due to the virus.

However, it should be noted that the vast majority of these quarterly earnings calls occurred before many industries in the U.S. were forced to reduce capacity or close altogether due to social distancing policies implemented in March to help reduce the spread of the virus. Of the 213 companies that cited “coronavirus” or “COVID-19” on quarterly earnings calls, 192 of these companies (90%) conducted their quarterly earnings calls in January or February. Have S&P 500 companies that discussed “coronavirus” or “COVID-19” during their quarterly earnings calls provided revised guidance on the impact of the virus in recent weeks?

The answer is not many. Of the combined 134 companies that either stated it was too early to quantify an impact from coronavirus (76) or did include an impact from coronavirus in their guidance (58) during their quarterly earnings calls, only 13 companies have issued quarterly or annual guidance since their call with a revised impact from the virus. On the other hand, 11 companies have withdrawn, suspended, or not confirmed previous quarterly or annual guidance since their quarterly earnings call. The remaining companies either did not provide an update after their quarterly earnings call, were still unable to quantify an impact, or left previous guidance unchanged.

Given the rapid changes that are taking place in the U.S. and global economy to combat the virus and the little time remaining in the first quarter, many S&P 500 companies may not provide any further updates on the impact of the coronavirus in guidance or suspend previous guidance until they report actual results for the first quarter in April and May. As Boston Scientific stated during a conference on March 11, “We feel very good about the underlying growth, the core Boston Scientific business, ex-COVID-19, but…we're not going to reiterate our guidance. At this point, we're not going to update our guidance from that February 5 call and we'll do that on our April call.”

Thus, there may be not be much change to the number of S&P 500 companies issuing EPS guidance between now and the start of earnings season. To date, 72 S&P 500 companies have issued negative EPS guidance for Q1, which is below the five-year average of 75.

Comments from companies that discussed "coronavirus" can be found in the full FactSet Earnings Insight report, which can be downloaded at the link below.