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MarketScreener Homepage  >  Indexes  >  USA  >  S&P 500    SP500

S&P 500

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Covid-19 Continues to Boost and Bust S&P 500 Companies

10/23/2020 | 11:24am EST

By Maria Armental

The shock of the coronavirus pandemic fueled a tech boom driven by online gaming and remote computing services in the most recent quarter, while companies such as airlines and entertainment ticketing services saw their business evaporate, driving big losses and even below-zero revenue.

The pandemic's uneven hit, reflected in companies' financial performance and data tracked by Dow Jones Newswires, is hampering the U.S. economic recovery and exacerbating the socioeconomic divide.

"The difference in the prospects of the 'have nots,' the 'haves' and the 'have much more' is especially stark in the post-Covid-19 world," data firm IHS Markit said, projecting an uneven K-shaped recovery.

"And you can see this very clearly in their stock prices," said Nariman Behravesh, IHS Markit chief economist, pointing to extreme differences across industries and demographic and income groups.

Take Nvidia Corp. and Occidental Petroleum Corp., the best and worst performing stocks respectively in the S&P 500 index over the past 12 months through Thursday's closing.

Nvidia, whose stock has nearly tripled in that time, initially lowered its first-quarter revenue forecast to account for the pandemic's potential impact. It went on to report a 39% first-quarter revenue increase, a 50% revenue increase for the second quarter and is on track for a record revenue year, driven by demand for online gaming and remote computing services.

Occidental, one of the largest U.S. shale producers whose stock has lost more than three-quarters of its value over the past 12 months, was already laden with debt from buying Anadarko Petroleum Corp. when the pandemic hit and oil prices collapsed. The Houston-based company, which had raised its dividend every year since 2002, slashed the dividend to a penny a share as part of broader spending cuts. It reported a second-quarter net loss of $8.35 billion and is expected to report its largest annual loss, according to FactSet.

Data tracked and analyzed by Dow Jones show the uneven effects of the pandemic, with at least 20 tech companies in the S&P 500 raising financial projections from July 1 through Sept. 30. Conversely, no companies in the energy, leisure, or entertainment spaces raised their outlook during that period, according to Dow Jones.

The energy sector has been clobbered by an about $160.75 billion revenue drop so far this year, according to Dow Jones data.

Tech companies have experienced a $31.47 billion revenue gain, second only to retail and wholesale, but much of that retail/wholesale gain was driven by Amazon.com Inc., according to Dow Jones.

Other winners include healthcare and life sciences companies, which account for the second-largest percentage of firms that have raised financial projections, Dow Jones found.

The health industry winners aren't just those working on potential treatments for Covid-19, the disease caused by the new coronavirus. Glucose-monitoring device maker DexCom Inc. is the second best performer on the S&P 500 over the past 12 months, after Nvidia, with shares also more than doubling in price over that period.

DexCom initially suspended financial projections for the year, but in July it said it expects $1.85 billion in revenue this year, $100 million above the midpoint of its initial forecast.

DexCom is benefiting from a bubbling technology-adoption trend along with recent telemedicine gains, said Kyle Rose, an analyst at Canaccord Genuity Group Inc. DexCom is a Canaccord client.

Companies relying on personal interactions saw business all but disappear as governments ordered people to stay home and stores to close to curb the spread of the coronavirus.

Concert promoter Live Nation Entertainment Inc. has seen a $3.45 billion revenue drop and reported negative revenue for its ticketing business in the most recent quarter. Company officials said they believe this will be a blip and note that concert and festivals ticket sales are pacing ahead of last year.

"Our expectations for a robust outdoor summer season in 2021 are also reinforced by the two-thirds of fans keeping their tickets for canceled festivals so they can go to next year's show, along with the strong early ticket sales for the festivals in the U.K. next summer," Live Nation Chief Executive Michael Rapino said during the second-quarter earnings call in August.

With travel demand showing few signs of rebounding, revenue lost by airlines is also in the billions. Delta Air Lines Inc. and American Airlines Group Inc. alone have lost more than $12 billion each, Dow Jones data show.

And the International Air Transport Association has said it doesn't expect passenger demand to recover to pre-pandemic levels until 2024.

For car makers, the revenue loss was even greater, the Dow Jones data show, with the original Detroit Big Three-- Ford Motor Co., General Motors Co., Fiat Chrysler Automobiles NV--losing a combined nearly $70 billion in sales in the first half. Fiat Chrysler isn't in the S&P 500.

Still, Tony Roth, Wilmington Trust Investment Advisors' chief investment officer, sees potential for the hospitality and airline industry. Current conditions have created pent-up demand that, once people feel safe to fly again, should help the industry and related businesses, Mr. Roth said.

Similarly, cruise ship operator Carnival Corp. has pointed to a post-pandemic cruise recovery, saying: "With two thirds of our guests repeat cruisers each year, we believe the reduction in capacity leaves us well-positioned to take advantage of the proven resiliency of, and the pent-up demand for cruise travel--as evidenced by our being at the higher end of historical booking curves for the second half of 2021."

Norwegian Cruise Line Holdings Ltd. and Carnival are the fourth and fifth worst performers in the S&P 500 over the past 12 months.

Mr. Behravesh, the IHS Markit chief economist, said he also sees a recovery in the hospitality and travel sectors and in entertainment, but one dependent on the widespread availability of a vaccine.

He sees the transportation sector's forecast as a little more mixed and the energy sector lagging behind. But the recovery, he said, will eventually trickle down to the energy sector, which should get a lift from people moving to suburbs and buying cars.

And while White House economic adviser Larry Kudlow has said he expects to see a rapid, V-shaped recovery, Mr. Behravesh says that though parts of manufacturing are seeing V-shaped recoveries, the service sector is seeing, at best, a U-shaped recovery and a "very flat U."

Write to Maria Armental at maria.armental@wsj.com

(END) Dow Jones Newswires

10-23-20 1123ET

Stocks mentioned in the article
ChangeLast1st jan.
AMAZON.COM, INC. -0.52% 3186.73 Delayed Quote.73.37%
AMERICAN AIRLINES GROUP INC. 8.28% 16.09 Delayed Quote.-48.19%
CANACCORD GENUITY GROUP INC. 4.54% 9.22 Delayed Quote.82.23%
CARNIVAL CORPORATION & PLC 8.13% 22.88 Delayed Quote.-60.36%
CURVES HOLDINGS CO., LTD. 5.38% 784 End-of-day quote.0.00%
DELTA AIR LINES, INC. 4.58% 42.95 Delayed Quote.-29.77%
DEXCOM, INC. 3.43% 344.63 Delayed Quote.52.33%
DJ INDUSTRIAL 0.29% 29969.52 Delayed Quote.4.50%
FIAT CHRYSLER AUTOMOBILES N.V. 0.38% 13.23 Delayed Quote.-0.11%
FORD MOTOR COMPANY 0.11% 9.21 Delayed Quote.-1.08%
GENERAL MOTORS COMPANY -1.10% 44.09 Delayed Quote.21.80%
IHS MARKIT LTD. -2.10% 90.61 Delayed Quote.22.83%
LIVE NATION ENTERTAINMENT, INC. -0.97% 69.22 Delayed Quote.-2.20%
LONDON BRENT OIL 1.59% 48.7 Delayed Quote.-28.42%
NASDAQ 100 0.09% 12467.128958 Delayed Quote.42.63%
NASDAQ COMP. 0.23% 12377.181515 Delayed Quote.37.70%
NORWEGIAN CRUISE LINE HOLDINGS LTD. 8.63% 25.42 Delayed Quote.-59.94%
NVIDIA CORPORATION -1.07% 535.84 Delayed Quote.130.25%
OCCIDENTAL PETROLEUM CORPORATION 3.15% 16.39 Delayed Quote.-63.29%
S&P 500 -0.06% 3666.72 Delayed Quote.13.56%
WTI 1.67% 45.62 Delayed Quote.-28.04%
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