What we’re reading (7/12)
“Wall Street’s Earnings Forecast: Cloudy With a Chance of Turbulence” (Wall Street Journal). S&P 500 constituents have been pulling guidance (their advice to the Street on upcoming earnings results) as a result of the Covid pandemic, resulting in the widest dispersion in analysts’ estimates since before Lehman went down in 2008.
“Get Ready For an Awful Earnings Season” (CNN Money). Speaking of earnings reporting, CNN is reporting that “analysts predict that earnings for the S&P 500 plummeted nearly 45%, which would be the biggest drop since a 69% plunge during the depths of the Great Recession in the fourth quarter of 2008. Revenues are expected to have fallen more than 10%. Retailers, energy companies and industrial firms likely reported the biggest declines in sales and profit.”
“Not An Earnings Care In The World — At Least Not Yet” (The Briefing). Another hot take on the upcoming earnings season. The author points out the irony in earnings likely to have fallen off a cliff while the S&P 500 keeps going up. Recall, though, it’s not earnings that matters for share prices, per se, but rather cash flows, and future cash flows at that. If you slash capex and headcount at the same time your earnings are going down, the overall hit to cash flow may not be all that bad.
“Hedge Funds Duel In Bankruptcy Court Over McClatchy Newspapers” (Dealbook). A couple of hedge funds are vying to take control of one of the “nation’s largest and most decorated newspaper chains” in its Chapter 11 restructuring proceedings.
“The Tech Stock Rally Is Getting Scary. Why There’s No Way To Escape It” (Barron’s). Per Barron’s: “Like an Escher drawing hanging in a student’s dorm room, the stock market has begun to look rational and irrational simultaneously. Nowhere is that more obvious than in the Nasdaq Composite. The tech-heavy index has gained 18% this year, after practically ignoring the explosion of Covid-19 cases in places like Florida and Texas. It ended the week with three consecutive highs, and for good reason[.]”
