Earnings season kicks into high gear next week with some of the pandemic’s hardest-hit industries, and while some are on their way to a full recovery, others are still in dire territory; here’s what to expect from the firms headlining the year’s first crop of reports.
Embattled cruiseline operator Carnival–last year’s worst-performing cruise stock, plunging nearly 60%–kicks off earnings Monday before the market opens, with analysts expecting sales of just $156 million–just 3% of the $4.7 billion the firm nabbed in the fourth quarter of 2019.
Carnival shares are down 2% Friday after a same-day note from Morgan Stanley analyst Jamie Rollo in which he reiterated an underperform rating for the stock and upped his price target on the stock to $14–still roughly 30% below current levels of about $20 per share.
Rollo said the cruise industry “will be one of the slowest subsectors to recover” from the Covid-19 pandemic, adding that a recovery won’t fully take off until international travel returns, ports reopen, authorities once again permit cruising and customer confidence returns.
Analysts project Carnival lost $1.7 billion last quarter, and fueling bearishness on Wednesday, the firm cancelled all U.S. cruises through the end of March, as well as several others planned for later in the year; Rollo says the company won’t likely return to pre-Covid profit levels until 2024.
Delta Air Lines will be the first in its own struggling industry to report earnings Thursday before the open, when analysts expect the company to post a loss of about $1.6 billion as sinking demand continues to plague airliners despite record mid-pandemic travel this holiday season; shares are still down about 30% from pre-Covid levels.
Friday morning ushers in big bank earnings headed up by JPMorgan, Citigroup and Wells Fargo as experts warm up to financials thanks largely to optimism over widespread vaccination and a mid-December announcement that the Federal Reserve would once again allow banks to buy back their own shares.
The pandemic’s been terrible for cyclical industries like financials, hospitality and travel, which tend to outperform during periods of economic prosperity and fall hard during recessions. Some experts think a quick turnaround is in store as widespread vaccination moves closer to becoming reality. In a note to clients earlier this month, Bank of America analysts called financials one of its top two sectors for 2021, calling them “unapologetically cyclical” and the “new growth stocks.” The outlook for hospitality and leisure, meanwhile, is a little bleeker. Job losses in December were heavily concentrated in the leisure and hospitality industries, where Covid lockdowns forced a decrease of nearly 500,000 jobs in December alone. CBRE analysts don’t expect hotels to return to pre-Covid revenue levels until 2024.
Shares of JPMorgan, the nation’s largest bank, have nearly returned to pre-Covid prices thanks to a post-Election Day rally that fueled resurgence in the broader financials space. But not everyone’s faring so well. Citigroup’s still hovering around 20% below its January stock price, while Delta and Wells Fargo are still down about 30%. Meanwhile, Carnival’s tanked 60%.
What To Watch For
December retail sales–which include services in travel and leisure, but not banking–are due out next Friday. Tokyo-based financials firm Nomura said Friday it expects a 1% monthly decline in the metric as the pandemic weighs on spending activity. That reflects a steepened decline from a 0.5% decrease in November.
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