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The Dow Jones – The Dark Side of COVID-19

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Stock Market

Throughout their history, the Dow and S&P 500 have been used inter-changeably to describe the overall stock market. For a long time, the Dow was the market to nearly all investors. It is easier to analyze 30 as opposed to 500 stocks. But these days, the S&P 500 is more quoted, largely because the financial services industry has endorsed it.

What can and can’t Dow Jones track?

The Dow Jones Industrial Average highlights the good and bad of today’s markets. On the other hand, you cannot track some large stock giants that don’t pay a dividend. Facebook (NASDAQ:FB), Google (NASDAQ:GOOGL) and Amazon (NASDAQ:AMZN), along with a few other NASDAQ giants, skyrocketed during the past decade. But they are not in the Dow. Moreover, they are practically an asset class by themselves. As for everyone else, the Dow should do the job.

This article will analyze the dark side of the COVID-19 storyline.

The latest earnings report of 3M (NYSE: MMM) was disappointing to say the least. Its organic sales declined 13.1% in the second quarter. 3M’s disappointing sales performance is a consequence of it being exposed to badly hit markets. Safety and industrial were hit by the slowdown in the automotive and aerospace markets. Transportation and electronic boarded that same train. Even healthcare dropped as COVID-19 pandemic has caused delays in elective procedures and closed dental offices all over the world.

Weakened consumer purchasing power

Severely weakened consumer purchasing power has been shown by American Express Company’s (NYSE: AXP) earnings that plunged as consumers were forced to stay home. But the company is doing what it can to get back in the saddle by launching a financial wellness tool to help users improve their credit score. By setting a desired target, they will receive personalized recommendations on how to reach it. On the other hand, Visa (NYSE: V) recently provided an earnings beat despite the still ‘frozen’ travel category, showing a glimpse of economic recovery thanks to e-commerce.

Non-existant travel

Speaking of travel, Boeing’s (NYSE: BA) earnings were as bad as it gets. The company reported a loss of $4.79 a share on $11.8 billion in sales for the second quarter whereas analysts expected a loss of $2.57 a share on $13 billion in sales.

Oil and gas fighting for survival

Even the oil giants are existentially threatened. There is hardly an oil company with a strong balance sheet like Chevron (NYSE : CVX) yet the pandemic crushed its profits. Together with its oil peer Exxon Mobil (NYSE: XOM), these are the only two oil giants that have the status of Dividend Aristocrats. But, maintaining that dividend comes at great cost as the second quarter was disastrous for both. Exxon raised a major new debt as it increased its long-term debt from $26.3 billion at December 31, 2019 by $20.2 billion until June 30, 2020. The cash position at June 30, 2020 was $12.6 billion which means that even with the debt, Exxon does not have sufficient cash to cover 12 months of dividend payout.

Caterpillar Inc (NYSE : CAT) saw its bottom line melt 64% compared to its prior year. Although its second-quarter revenues of $10 billion topped estimates of $9.2 billion, the top line dropped 31% due to lower sales volume. The pandemic diminished demand and consequently, dealer inventories were impacted negatively.

Failing to keep up with Big Tech

On Wednesday, Cisco (NYSE: CSCO) just reported its fourth consecutive revenue decline in its quarterly guidance. The 9% revenue decline resulted in its shares falling approximately 6% during extended trading. While much of the technology sector is seeing growth as the economy is getting an online shape and companies are turning to software to run their businesses, Cisco is struggling to keep up. The problem is that its core business has been centered around expensive hardware. Hardware has been pushed aside by cloud giants. The company’s investments in software wasn’t enough to come near Amazon, Microsoft and Google. But at least it topped estimates with 80 cents of adjusted earnings per share vs. 74 cents per share expected by Refinitiv. Revenue was $12.15 billion as opposed to the $12.08 billion expected.

Intel (NASDAQ : INTC)’s fall could get even worse. Its shares plunged followings its second quarter results that saw revenue come in 6.3% better than estimates at $19.7 billion. Earnings also came in ahead of forecasts by 10.7% at $1.23. It’s the earnings guidance for the third quarter that is causing concern. Since the report, analysts have been lowering their estimates, fearing that its shaky stock could led to big losses.

The House of Mouse came close to burning in flames

The iconic business model of Walt Disney Corporation (NYSE: DIS) that many failed to copy is what made the legendary House of Mouse perfectly exposed to the pandemic. COVID-19 has shuttered Disney to pieces during the first two quarters . And if there wasn’t for its streaming star that now exceeded 60 million subscribers, it would have been in ashes by now. The net adverse impact of the pandemic on its current quarter operating profit across all business has been about $2.9 billion. Moreover, during the second quarter, pandemic-induced theme park closures melted its operating profit by 58%.

Altered consumer behaviour

Walgreen Boots Alliance (NASDAQ: WBA) profit has declined over the last three years, even though its revenue has increased. But in July, the company announced a $1.0 billion investment into VillageMD. This investment also includes opening 500 to 700 physician-staffed clinics inside their locations across 30 markets over the next five years. This big news was announced just a few days before third quarter earnings that showed  substantial negative operating income due to the pandemic. Although it was expected that COVID-19 has temporarily altered consumer behavior, Walgreen’s report showed that some of these changes could be in for the long-haul. Although WBA deserves an applause for speaking out so early in the game which is very far from over, this raises many questions and increases the level of uncertainty.

Takeaway

These 11 Dow members are reflecting the world’s ongoing battle with COVID-19. It shows how the mightiest can fall. Fortunately, there are 19 of its members who have utilized the pandemic to become even stronger or at least have a shot to emerge out of it as winners. Now, that story has a great ending. It shows how a business can always find the opportunity to thrive. This other group will also give us a good idea how will the world look like after we put this pandemic behind us.

This article is not a press release and is contributed by a verified independent journalist for IAMNewswire. It should not be construed as investment advice at any time please read the full disclosure . IAM Newswire does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com Contributors – IAM Newswire accepts pitches. If you’re interested in becoming an IAM journalist contact: contributors@iamnewswire.com

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BenzingaEditorial

COVID-19 Will Make Disney Even Stronger

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Disney News

During its last reported quarter, Disney (NYSE: DIS) lost $2.4 billion of its parks and experiences segment which saw revenue drop as dramatically as 61%, generating $2.6 billion. The segment includes its parks, cruise lines, resorts and merchandising, which were ‘perfectly’ exposed the havoc brought on by COVID-19. But, the worst seems to be behind the legendary entertainment giant.

The effects of a global pandemic

Although the majority of Disney’s theme parks managed to reopen during the company’s fiscal fourth quarter at a limited capacity, the continued closure of Disneyland California was a big financial hit. It is certain that it will remain closed until the end of the year as state guidelines prohibit reopening until coronavirus cases in counties fall below 1 per 100,000. This target will be difficult to achieve as cases soar throughout the country.

In the second quarter, the pandemic took $1 billion from this segment’s operating income. By the end of the third quarter, the loss amplified to $3.5 billion. The fourth quarter that ended on October 3rd, 2020 saw a loss of $2.4 billion with COVID-19 ended up costing Disney $6.9 billion for the whole year.

Disney Plus ended up being Pixie Dust

The flip side is that the measures taken to combat the spread of the virus actually launched Disney’s latest streaming venue to the stars. By October 3rd, Disney+ had 73.7 million subscribers, exceeding all expectations by far. Amilestone Disney expected to reach in 2024 was achieved during its very first year of existence.

With an average revenue per user of $4.52, Disney now has a new jewel that is expected to generate a revenue of approximately $4 billion on an annual basis. Moreover, this forecast implies an assumption that the current number of subscribers remains unchanged. Considering that Disney’s streaming star is set to launch in many new countries across the globe, the number of total subscribers is likely to continue increasing.

Streaming battlefield

The streaming boom is perhaps best described by the Los Gatos, CA-based tech firm that benefited from the influx of all new entries that aim to challenge Netflix (NASDAQ: NFLX), including Disney+, Apple TV+ (NASDAQ: AAPL) and Comcast Corporation’s (NASDAQ: CMCSA) Peacock. Roku (NASDAQ: ROKU) reported 14.8 billion hours of streaming in its third quarter, which is a growth of 54% compared to last year’s quarter.

Only one streaming newbie does not have a deal with Roku and that is AT&T’s (NYSE: T) WarnerMedia’s HBO Max. HBO Max was launched in May and didn’t come near to Disney’s subscribers record, but WarnerMedia seemed pleased with 8.6 million account activations. However, last Monday, the subscription service just announced it sealed a distribution deal with one major gatekeeper, Amazon (NASDAQ: AMNZ) Fire TV. Two days later, Warner Bros revealed Wonder Woman 1984 would be released on HBO Max along with opened theaters next month. It seems the world is, once again, asking too much of Diana with the movie now expected to simply break even as opposed to achieve a new box office record. This announcement only intensified speculation that Roku’s 46 million households will soon enter the equation.

Despite streaming wars intensifying, Disney has something that no one else has. Its secret weapon is its legacy in the form of its content for every age group and one can argue, every taste. Disney’s content is the wholly grail that appeals to everyone on the planet and is what enabled it to lure in all those subscribers in a record amount of time.

Disney will return even stronger

It appears that Disney is half to one year away from leaving this pandemic nightmare behind it. But once it goes back to operating at full capacity, Disney will also have a rapidly growing streaming business to support its highly profitable legacy businesses that are slower-growing. Disney achieved a good track record in the battle against COVID-19 by adapting its operations to a sanitary framework and these efforts might allow the rest of its businesses to return to normalcy by next summer. Based on early results from the partially opened theme parks and early reservations for cruises, the iconic entertainment company revealed that there is pent-up demand for these businesses that will flourish as soon as they get back up and running. Just like its heroes, Disney is poised to triumph at the end of this global saga. There is no doubt that Disney will “return” and even stronger than it was before COVID-19 turned the world upside down.

This article is not a press release and is contributed by a verified independent journalist for IAMNewswire. It should not be construed as investment advice at any time please read the full disclosure . IAM Newswire does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com Contributors – IAM Newswire accepts pitches. If you’re interested in becoming an IAM journalist contact: contributors@iamnewswire.com

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BenzingaEditorial

Thanksgiving Week

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Thanksgiving

As the stock market will be closed for Thanksgiving on Thursday and open only for a half-day of trading Friday, Wall Street is getting ready for a shorter week. There are no new IPOs scheduled for this week either. The past week brought a waterfall of retail earnings, but a river of reports is due this week as well that could show how specialty stores are managing as essential stores continue to gobble up market share.

Monday

After market close, Urban Outfitters (NYSE: URBN) will open the week. Urban’s stock soared after reporting a surprise profit in August but as for all retailers these days, e-commerce will be the highlight of report. Investors will also look at its Anthropologie brand that has suffered due to a hefty price tag. Analysts are expecting earnings per share to come at 44 cents.

Tuesday

Autodesk Inc. (NASDAQ: ADSK) results for the fiscal third quarter are coming out after the close. Zack’s consensus estimates call for $0.96 in EPS and $942.24 million in revenue.

Dollar Tree (NASDAQ: DLTR) comes with strong revenue and earnings expectations for Q3 as in the last reported quarter, the company delivered an earnings surprise of 23.6%. Although it managed to be classified as an essential as opposed to a specialty retailer, its stock has lagged behind its peers, event after reporting better-than-expected results in August. Its downsides are in greater exposure to discretionary and seasonal items as well as operational issues, which is why it stock is up just 2% this year, compared with Dollar General’s (NYSE: DG) 36% gain. This report is another chance to prove it can keep up with its discount rivals with consensus forecast being $1.15 in EPS on a revenue of $6.12 billion.

As for Medtronic (NYSE: MDT), the consensus forecast calls for $0.80 in EPS and $7.08 billion in revenue for the fiscal second quarter.

The retail front

Expectations have also likely been raised for Burlington Stores (NYSE: BURL) as loyal shoppers have been quick to return to stores. Recent reports from larger peers such as TJX Cos. (NYSE: TJX) have been encouraging with analysts predicting EPS to swing from a 56-cent loss in the prior quarter to a 16 cents gain. But, this is still far below earnings of $1.55 a share in the same period last year.

As for Dick’s Sporting Goods (NYSE: DKS) analysts anticipate $0.98 in EPS and $2.22 billion in revenue. With shares down more than 48% year to date, Nordstrom (NYSE: JWN) has been the worst performer of the group, although it has traded roughly in-line with its department store peers. A multi-brand specialty retailer, American Eagle Outfitters (NYSE: AEO) might not be the most widely known stock at the moment, but it received a lot of attention from a substantial price increase on the stock exchange over the last few months. The Gap Inc (NYSE: GPS) has seen a major reversal of fortune in 2020. During the first half of the year, it was out luck with closures and its rent dispute. But, then it got upgraded by analysts, it sealed a 10-year deal with Kanye West, and enjoyed a rebound in the second quarter due to strong e-commerce growth. Now the question is if Gap can keep up its online momentum as well as the general one. Analysts are expecting EPS of 31 cents for the third quarter, an improvement from prior quarter’s 17 cents but still significantly below last year quarter’s 53 cents.

Tech

After the closing bell, HP Inc. (NYSE: HPQ) will report its fiscal fourth-quarter results with analysts forecastingEPS of $0.52 on a revenue of $14.65 billion. As for Dell Technologies (NYSE : DELL), the consensus forecast is at $1.39 in EPS on a revenue of $21.85 billion for the fiscal third quarter.

Moving on to software and cloud computing, VMware’s (NYSE: VMW) is expected to generate total revenues of $2.80 billion, implying 5.4% year-over-year growth for its third-quarter with non-GAAP earnings of $1.42 per share. While microprocessor and memory market ‘servers’ remained largely undisrupted by the pandemic, Analog Devices (NASDAQ: ADI) still faced challenges due to an unstable demand as well as seasonal factors. However, the situation is improving and the management is confident of ending the fiscal 2020 on a positive note and getting back on track next year.

Consumer electronics retail

Best Buy’s (NYSE: BBY) third-quarter earnings are expected to be strong as it benefits from pandemic-related trends. The consensus forecast is for EPS of $1.69 on a revenue of $10.97 billion.Stock has already added about 36% year to date, leaving other big-box retailers behind. Paradoxically, much of that strength came from COVID-19 that boosted online sales as people needed electronics to facilitate their home stays. Moreover, the digital business continued booming even after most of its stores were allowed to reopen. As the virus looks poised to wreak more havoc over the winter, Best Buy seems to be poised to benefit. But, if it can convince investors that its post-vaccine outlook is just as bright, it could easily be on a path to even more gains.

Foods

Moving on to jams, peanut butter and other toppings, J.M. Smucker (NYSE: SJM) is likely to register a decline in its bottom line when it releases second-quarter fiscal 2021 numbers although it delivered positive earnings surprise of 41.1% in the last reported quarter. Meanwhile, Hormel Foods (NYSE: HRL) is likely to register an improvement in its top line along with a YoY decline in its bottom line. The Zacks Estimate for revenue stands at $2.60 billion, which would be 3.8% from the previous year’s comparable quarter.

Wednesday

Deere & Company (NYSE: DE), the world’s largest makers of farm equipment, is performing excellently so far this year. Shares of the agricultural, construction and forestry equipment manufacturer are up about 50% for the year to date. As for the fiscal fourth quarter, the consensus forecast stands at $1.38 in EPS on a revenue of $7.68 billion.

Outlook

Although Thanksgiving is an optimistic holiday that is all about gratitude, the gloomy news of rising daily coronavirus cases and worries of the U.S. economic recovery will still be in the air during the last week of November. The third-quarter earnings reporting season is slowly winding down but as for the IPO front, at least December is shaping up to be a very busy month. With the e-commerce retailer Wish, the payments company Affirm, along with the eagerly awaited Airbnb all filing to go public, at least we’re in for a grand finale of this unprecedented year.

This article is not a press release and is contributed by a verified independent journalist for IAMNewswire. It should not be construed as investment advice at any time please read the full disclosure . IAM Newswire does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com Contributors – IAM Newswire accepts pitches. If you’re interested in becoming an IAM journalist contact: contributors@iamnewswire.com

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BenzingaEditorial

A Lesson From Starbucks

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Starbucks News

Gourmet beverages might belong to the category of cheapest luxury goods, but these manufacturers suffered this year along with the overall economy. Even leaders such as Starbucks (NASDAQ: SBUX) and PepsiCo (NASDAQ: PEP) saw significant sales declines as soon as lockdowns took place, but they managed to crawl out from the mess.Starbucks specifically has taken coffee to the next level with 32,000 cafes across the globe. So, what did Starbucks do that helped it stay afloat?

The effect of a global pandemic

Starbucks revealed COVID-19 made it lose $1.2 billion in sales as an impact of limited operations, reduced hours as well as closures. This year, the US coffee chain saw everything but its typical quarter where sales and comps both score notch high growth numbers as they bottomed out at as low as a 65% decline during the company’s third quarter.

Competitors

For now, the coffee giant does not really have a real competitor be threatened by. Dunkin’ Brands’ (NASDAQ: DNKN) Dunkin’ Donuts stores and McDonald’s (NYSE: MCD) do both sell coffee. Moreover, McDonalds announced last week it plans to spend approximately $381.6 million in the Chinese coffee market over the next three years via its coffee brand McCafé. By 2023, 4,000 McCafé outlets should be up and running on the Chinese mainland so coffee wars might intensify in the near future.

Although the controversial Luckin Coffee Inc (OTC: LKNCY) did shake its ground in China, there isn’t another retail chain anywhere the size of Starbucks that only focuses on beverages. Both Dunkin’ and McDonald’s trail behind Starbucks in sales and Luckin is still grappling with a fraud controversy despite its stock surge.

The right “recipe”

Since COVID-19 started its relentless march across the globe, Starbucks aggressively defended its top position by opening more drive-thrus, giving salespeople point-of-sale devices for quick transactions, and focusing on suburban store openings. Last week, it announced it is raising wages for its baristas of at least 10% starting December 14th. Starbucks is already known for giving its workers more generous benefits and pay compared to its peers in the restaurant industry.

The secret weapon – the mobile app

In September, the coffee giant launched a new loyalty program in September that offers an enhanced shopping experience as well as rewards for members. Those same members that account for a large chunk of sales.

It’s been five years since Starbucks rolled out the ability to place orders using its mobile app. Customers are loving this feature as it is as good as it gets to benefit from the customized Starbucks experience. The company rolled out mobile payments already in 2011, letting customers link a Starbucks card to the app to pay for their orders. This ended up being a brilliant strategy that more than paid off during the pandemic which demanded a ‘contactless’ service. Moreover, it made Starbucks’s app the most popular mobile payment processor as it’s sometimes even more used than Apple’s (NASDAQ: AAPL) ApplePay, according to e-Marketer. Starbucks revealed that almost one quarter of total orders in its stores come from the mobile app.

Results

Despite the difficult environment, the coffee giant managed to exceed expectations with its last reported quarter largely because of a decision it made years ago. Analysts had expected Starbucks to earn $6.06 billion, but despite the pandemic having reduced its customer traffic, revenue for the quarter ended up being $6.2 billion. Adjusted EPS of 51 cents also exceeded Bloomberg’s estimate of 31 cents.

While the pandemic is still raging over many parts of the globe, the worst seems to be behind. Starbucks did see a 9% revenue drop in the fourth quarter ended on September 30th, but it’s been improving quarter to quarter while topping estimates every time.

Due to the global health and consequent economic crisis, Starbucks has seen its revenues fall 11% YoY to $23.5 billion during FY 2020 that ended in September. But, it managed to beat earnings expectations with EPS of $0.79 while reporting a cash inflow of $1.6 billion from operating activities.

FY 2021

Starbucks is forecasting double-digit growth in fiscal 2021 as it aims to regain everything it lost in 2020 while moving forward. Earnings were already positive in the fourth quarter and sales are already positive in its second fastest-growing market- China. Trefis expects Starbucks’ revenues to recover after this unprecedented year and rise by 21%, in the range between $28 billion to $29 billion. Its net income is likely to follow the positive trend of recovery as it is estimated at $3.7 billion, with the expected EPS of $3.17.

Outlook

Even the business that were able to stay open during the pandemic felt the pain of those that were forced to close their doors. Everyone who survived had to quickly figure out how to make drastic changes to the way they served their customers while protecting their employees from the virus. Remarkably, Starbucks managed to keep going after a very harsh reality check. Five years after it launched its mobile app, it ended up being ‘saved’ by this feature. This story only shows that being focused at constantly improving the customer experience never gets old. The lesson is simple: what was good for the customer ended up being very good for the business.

This article is not a press release and is contributed by a verified independent journalist for IAMNewswire. It should not be construed as investment advice at any time please read the full disclosure . IAM Newswire does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com Contributors – IAM Newswire accepts pitches. If you’re interested in becoming an IAM journalist contact: contributors@iamnewswire.com

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