Week of November 2: COVID-19 Corporate Event Impact Report
- Officials are responding to the rapid surge in COVID-19 cases across the developed world with fresh restriction measures likely to have significant economic impacts
- Earnings season is in full swing, and firms are beating estimates at a high rate, but stock market performance has been weak
- Headline risk is extremely high as we head into year-end – having the most accurate and up-to-date corporate event data is more important than ever
Restrictions Issued as COVID-19 Spreads
Financial markets around the world have once again been rocked by surging COVID-19 cases. From Europe to the US, restriction measures are being taken by officials in an effort to combat the spread of the virus. The big 5 European nations – Germany, France, Italy, Spain, and the UK – are all enduring rapidly climbing case counts while smaller nations on the continent are the major hot spots. In the US, the pandemic is hitting the center part of the CONUS hard as daily case counts set records.
But what does it all mean for portfolio managers and traders?
Volatility and uncertainty. It’s also different this time versus the spring; a vaccine is expected during the first half of next year, so there is light at the end of the tunnel. Nevertheless, work from home and virtual learning trends are likely to extend through the spring. Stimulus hopes will perk back up post-election, and brick & mortar businesses will need it badly. Many restaurants, particularly local shops in urban areas, will go out of business, unfortunately. A narrative we have seen play out is that of the bigger firms getting bigger at the expense of smaller enterprises.
Biopharma Earnings Date Outlier
COVID-19 is not the only story. We are in the heart of third quarter earnings season. Wall Street Horizon closely monitors firms that report earnings outside of the normal pattern. A significant outlier set to report Monday next week is BioMarin (BMRN). A NASDAQ 100 member, BMRN is a biopharmaceutical firm focused on producing drugs for rare disease treatment. On August 5, we set an inferred Q3 earnings date of October 21 based on their historical reporting trends. BMRN’s earnings date was then revised on August 12 to October 28. Finally, on October 22, BioMarin issued a press release stating Q3 2020 results would be published on November 9 after the bell. The change results in a high Z-score of 4.47. Portfolio managers should monitor this release for unusual news and traders should be on guard for volatility.
Wall Street Horizon Z-score: statistical measurement of how an earnings date (confirmed or revised) compares to the reporting company's 5-year trend for the same quarter. This metric is included in our DateBreaks product, learn more.
Q3 2020 - An Unusual Quarter During a Unique Year
As reporting season progresses, we noticed an unusual trend at a macro level. It turns out that a third of North American indexed companies are reporting a week later versus the same quarter a year ago. Whether this is due to the pandemic’s uncertainty is hard to gauge, however the result is a confluence of market risks for investors to grapple with. We have corporate earnings season hitting its peak last week and this week, the US general election tomorrow, and a sharp COVID-19 wave leading to social and business restrictions. Can you recall a time with more headline risk? Now more than ever, money managers must possess the latest and more accurate forward-looking corporate event data.
Conferences and Meetings from Energy to Restaurant Industries
Several potential market-moving shareholder and analyst meetings are on tap this week. Avangrid (AGR) will host its 2020 Investor Day (Virtual) on Thursday. The major US utility firm recently acquired PNM Resources Inc. in an all-cash deal. This corporate event is indicative of a broader trend this year. Renewable assets are in high demand. Wind and solar generation are taking off across the globe – from emerging markets to developed Europe to the US. The potential for a change in the White House and Congress next year could accelerate the trend. Portfolio managers should be on high alert for more M&A news out of the energy and utilities space as the landscape quickly shifts. For AGR, the Investor Day should shed light on details of the acquisition and the broader state of green energy.
Two major restaurant chains have pending shareholder meetings this week. Dominos Pizza Enterprises (DMP), based in Australia, is slated to host its event on Wednesday. The major fast food chain’s Australia division should provide color on a business that has thrived before and during the pandemic as consumers seek quick and safe meals for the family. On Thursday, Brinker International (EAT) is scheduled to host its shareholder meeting. While in-person dining got crushed during the height of the pandemic’s onset in March and April, high frequency data shows that traffic has been increasing in the last several months for major restaurant chains like Olive Garden and Red Lobster. A recent survey conducted by Bank of America showed that 62% of respondents said they had frequented a restaurant 1-3 times per week as of early October, up from 55% in April. Still, just 36% of those surveyed felt comfortable dining in a restaurant. Times are still tough for the restaurant industry – even for the big names. A resurgence of COVID-19 will make matters worse.
Dividend Changes in Technology and Discretionary Sectors
Our proprietary data shows that Standard Motor Products, Inc. (SMP) resumed its dividend on October 28 while Maxim Integrated Products Inc. (MXIM), listed on the NASDAQ 100, suspended its dividend on October 27. High dividend-paying firms have been hit hard leading to one of the group’s worst years relative to non-dividend paying stocks on record. Among the many corporate events we highlight for our customers are key changes in dividend policy for companies large and small around the world.