Quantifying the earnings impact of COVID-19
Talley Léger. Investment Strategist
We assume a baseline of $154 or 0.5% year-over-year for first quarter 2020 S&P 500 trailing 12-month operating earnings per share (EPS).
From our lens, it appears the cost of the virus-related shutdown has been $3 of EPS each week ($154/52), assuming all S&P 500 companies were idle. If half of those firms were idle ($24/2), an 8-week shutdown may have cost $12 of EPS ($154-$142).
As such, we believe a broad market earnings recession began in the first 3 months of this year with a 7% decline from year-ago levels, which will likely be followed by much deeper declines in later quarters. Clearly, the shutdown becomes more costly with each passing week.
While stocks have enjoyed a liquidity-fueled rally off the March low, we think investors should prepare themselves for the possibility of additional market volatility in what promises to be a grim earnings season.
To learn more, check out the charts.
Investment risks
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Important information
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Data as at 20.04.2020, unless otherwise stated. This document is marketing material and is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell securities.
Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals, they are subject to change without notice and are not to be construed as investment advice.
