Bad Q1 earnings caused by coronavirus

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Pebbles Merriweather
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Bad Q1 earnings caused by coronavirus

Post by Pebbles Merriweather »

Coronavirus is going to destry company earnings. Even when it ends (if?), another thing to keep in mind is that corporations are going to come out of this scared, in pain, and with a new interest in getting their debt/balance sheets under control. That means an end to borrowing to do buybacks after the end of Q1 2020. The stock buyback frenzy is over. Stocks have only gone up the last few years because of companies buying back their own stocks. It was all P/E expansion.

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Re: Bad Q1 earnings caused by coronavirus

Post by Brittany »

No one knows yet when the peak of the coronavirus happens but one think is sure at a minimum the next two earnings quarters (Q1 and Q2) will be a disaster. So why would anyone think were even close to the bottom of the stock market. Stocks increased because Trump and the GOP wanted and got the Tax Plan passed. Then when interest rates increased stock prices fell a little and Trump got the stock prices higher again.
Share buy backs, CEO's and executive bonuses is what the Tax Plan gave the companies. Trump and the GOP said the Tax Plan would increase GDP to 4%-6% and eliminate debt in 8 years. Trump lied to his supporters but they still follow the king of debt. We now have trillion dollar budget deficits because of the Tax Plan.
Expect the stock prices go down by the end of Q1. Who wants to hold stocks when the news could get worse.

Corsica lyons
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Re: Bad Q1 earnings caused by coronavirus

Post by Corsica lyons »

It's too early to know the actual death rate so therefore too early to know Q1 earnings impact. Mass testing needs to be done of those that are not seriously ill to get a more accurate death rate. Currently in the U.S. the death rate of those infected is about 1.76%. I wouldn't look at the death rate from other countries and apply them to the U.S. since the quality of healthcare isn't the same in every country. Likewise other countries also need to do more mass testing to get a more accurate death rate as well.
I would expect that 5-20% of the U.S. population will become infected since COVID-19 transmission is similar to the seasonal flu. It is is that high, then Q1 through all year earnings will be crushed. Though with the preventive measures being taken less people will get infected. On the high side I would estimate that 10-15% of the U.S. population will get COVID-19 which is about 32-49 million people. With the current U.S. death rate of 1.76% the average number of deaths would be about 713,000 assuming that 12.5% of the U.S. population gets infected. That's about 11x more deaths than the seasonal flu. This would be over the course of a year. Stocks will be crushed due to mass panic, but probably not justified.
About 2.8 million people die every year in the U.S. so if the estimates above occur then COVID-19 could account for 20% of all deaths for the year. I don't believe we'll see that level of deaths. The preventive measures that are being taken, treatment options in the near future, along with massive testing will likely reveal that the death rate is much lower, at least in the U.S.

Site Admin
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Re: Bad Q1 earnings caused by coronavirus

Post by admin »

Hi Brittany
That is actually one of the best times to buy stocks. You want to buy when "news is bad". Generally the stock market bottoms out when a recession starts....then it continues to go up even while we are in the recession. Bad news is historically one of the best times to purchase stocks.
Brittany wrote:
Fri Mar 27, 2020 11:30 am
Who wants to hold stocks when the news could get worse.

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