Winners and Losers on Full Display As 1Q Earnings Season Ramps Up

Author: Gary Ashton

Estimated read time: 3 minutes

Publication date: 21st Apr 2020 13:43 GMT+1

This week's 1Q earnings season moves into a higher gear with the release of results for 98 companies in the S&P 500 equity index. Analysts will begin the task of sorting out the winners from the losers as a result of the global Coronavirus outbreak. Names that are likely to be big winners are the ones able to capitalize on government-imposed isolation policies. In contrast, the biggest losers will likely be companies associated with travel, entertainment, and leisure. Analysts have taken to calling companies in these industries "beach stocks," and are actively avoiding most providers related to going on vacation.

Stocks Expected to be Big Winners

Some of the key companies that could prove to be big winners reporting financial results this week include Netflix (NASDAQ: NFLX), AT&T (NYSE: T), Verizon Communications (NYSE: VZ), and Intel Corp (NASDAQ: INTC). These companies are well-positioned to capitalize on government-imposed stay-at-home orders. Analysts are particularly excited about Netflix because of its entertainment streaming service that is serving as a replacement for more traditional media consumption, such as going to the movies. Analysts have revised up Netflix's 1Q earnings estimate of $1.61 per share by 42% in the last 90 days, and has a "strong buy" earnings rating on the stock.

Other names that could see a 1Q bump include communication names like AT&T and Verizon, as many professionals are using broadband and Wi-Fi services to work from home. Computer makers and chip producers like Intel should also benefit as the same workers upgrade computer systems or build out home offices to keep businesses operating in the wake of government-imposed stay indoors lock-down orders.

Stocks Expected to be Big Losers

On the flip side are companies associated with travel or close personal contact. Stocks in these industries will likely report weaker results due to Coronavirus related travel restrictions. This week Wall Street gets results from Delta Air Lines (NYSE: DAL), Southwest Airlines (NYSE: LUV), and Las Vegas Sands Corp (NYSE: LVS). Analysts expect Delta to report a quarterly loss of $0.70, with analysts revising down this figure by nearly 90% in the last three months. Wall Street anticipates Southwest Airlines to report a loss of $0.15 per share, a 57% downward revision over the previous 90 days. Analysts still expect resort operator Las Vegas Sands to post a small gain of $0.06 per share, but like for Delta, they have pushed this 1Q figure down by over 90% in three months.

Airlines and resorts are not the only names that analysts expect to get hit hard. Restaurant chain operator Chipotle Mexican Grill (NYSE: CMG) reports 1Q results on April 21. Analysts still forecast a profit of $2.64 per share, but this is a 26.37% downward revision compared to three months ago. Nonetheless, the stock has rebounded sharply off the March 18 low of $415 per share to close at $820.27 last week. This week's results will show if Wall Street's expectations for Chipotle are too optimistic or if there is some light at the end of the Coronavirus tunnel.

Disclaimer: The writer is an experienced financial consultant who writes for The observations he makes are his own and are not intended as investment or trading advice.