As much as U.S. companies have suffered from the pandemic, their global competition has struggled even more.
Fourth-quarter earnings per share for S&P 500 companies are on pace to rise 2.3%, while those for Europe, Australasia and Middle East (EAFE) are projected to slide 12.7%, according to data compiled by Credit Suisse using both actual company reports as well as analyst estimates. Revenue is forecast to edge up 0.7% in the U.S., compared with a 5.4% downturn in the EAFE regions.
Granted, companies everywhere are trouncing expectations — in Japan by nearly 25%, and the beat rate in Europe is the strongest in a decade, according to the Credit Suisse data through Feb. 10.
But the bigger question is how much earnings matter at this stage anyway, given the uncertainties around coronavirus. “Now what’s going to happen in the second half year is a question mark,” said Thomas Schinecker, the chief executive of Roche’s ROG, -1.17% diagnostics division, on a conference call. “One is, how quickly is the rollout of vaccines. Now is this going to take longer? Then the question is really on the different variants. What kind of level of vaccine rate do you need to have to get really to herd immunity, et cetera?”
So what might be more of use than earnings trends are the comments from leading executives. Drawing on transcripts provided by Capital IQ, here’s a look at some of the most notable comments made so far.
One point of emphasis from energy producers was that traditional fossil fuels will still be in use, even as pressure is put upon them by investors and the incoming Biden administration to shift toward renewables. John Kerry, the Biden administration’s special envoy for climate change, was quoted as saying building a huge infrastructure for gas now will mean being stuck with stranded assets in 10 to 30 years.
Royal Dutch Shell RDS.A, +1.02% Chief Executive Ben van Beurden insisted there wasn’t a discrepancy with Kerry. “I don’t think we are as much misaligned as it may appear. We think natural gas is an important fuel for the future. And indeed, we also agree with what I think Secretary Kerry meant to say very clearly, is that methane is a very potent greenhouse gas that needs to be contained, that needs to be minimized.”
BHP Group BBL, -0.29% Chief Executive Mike Henry pointed out the Biden administration’s pause on granting new leases on federal lands wouldn’t preclude existing assets. In fact, it could be a help. “If you’re an existing producer with some big assets like we have, that could be positives therein,” Henry said. He suggested the diversified mining company might look to snap up more oil assets. “We, of course, recognize the trends that are playing out around us in terms of long-term oil and gas demand in a decarbonizing world. However, given how essential oil is to so many of the processes that underpin life as we know it today and will remain the case for some time, we think there will be a measure of resilience to demand going forward,” he said.
Executives were saying how COVID-19 has changed their business — or not. Philips PHG, -0.52% Chief Executive Frans van Houten offered an optimistic outlook. “It’s pretty normal that elective procedures are rescheduled when hospitals are full of COVID patients. I would turn it around and actually say we should take some encouragement that at this time, it is only 20% to 30% down, while back in April, it was 70% down, right? So hospitals are much better able to cope with the pandemic than before,” he said.
Diageo DEO, -0.15%, the alcoholic-beverages giant, has seen its e-commerce business accelerate. “In the U.K., it took 10 years to step up 5 points of alcohol penetration in e-commerce. And with COVID, 8 points got added in four months of penetration, so a significant increase. Our businesses, we pivoted very quickly and moved teams and dollars into e-commerce right around the world, from Colombia to Uganda,” said Diageo Chief Executive Ivan Menezes. “And typically, our market share on e-commerce platforms tends to be higher than our market share in brick-and-mortar.” On online liquor store Drizly, which is being acquired by Uber UBER, +0.48%, spirits do particularly well, he added.
LVMH Moet Hennessy MC, -0.89%, which owns a number of luxury brands, says the bigger brands are getting a boost. “As always, in crisis time, the big brands do better than the smaller ones. It’s not new,” said Jean-Jacques Guiony, LVMH’s chief financial officer. “I mean, remember in 2009, it was exactly the same thing. Should we decide that we should be concentrating only on a handful of brands because they do better in bad times and give up on the other ones, certainly not. I mean, there are benefits to having a large group of brands, as we discussed many times together, and we do not intend to change our strategies in this respect.”
Demand for high-tech electronics has been so great that there has been a shortage of necessary supplies for the automobile sector. “Unfortunately, the car industry woke up very late, and the lead times of semiconductors are what they are. And you cannot overnight increase the capacity like a direct bus,” said Jean-Marc Chery, chief executive of STMicroelectronics STM, -1.72%, the microchip maker.
Deutsche Bank DB, -0.70% Chief Executive Christian Sewing was asked about a hot part of the market, special-purpose acquisition companies, or SPACs for short. “What we can see, it’s not only the initial SPAC business, there’s a lot of add-on business with the SPACs with also some financing behind that. And therefore, it turns actually into a business where there is a lot of incremental and cross-selling,” he said.
But Sewing also offered words of caution. “We are monitoring that business quite closely. Clearly, the market has grown. That also always means that you need to stay close to it, and that’s exactly what we are doing, not only from a business point of view but also from a risk management point of view, and that’s what I would add to this,” he said.
Intesa Sanpaolo ISP, -0.78% Chief Executive Carlo Messina was asked for advice for Mario Draghi, the former European Central Bank president who was in the process of becoming Italy’s next prime minister. “What I think we need in Italy is to work in terms of sustainability of growth and inclusive growth and working with significant attention to inclusion, poverty and to the employment,” said Messina. “The most important part of the story is that Europe needs to be at the level of U.S.A., China. And only with Italy strong, Europe can be strong enough to compete with U.S.A. and China,” he said.
Masayoshi Son, the always colorful chief executive of Japanese investment group SoftBank 9984, +0.34%, likened his firm to a goose laying eggs. When the internet bubble burst, he pointed out, it wasn’t the peak of the market.
“You realize that if you look back that, because the stock price now is much bigger than the stock prices back then. And likewise, AI [artificial-intelligence] companies, for a short period of time, their share price may go up and may go down dramatically, but because it’s just the beginning, the more important thing is the AI revolution has just started. So short-term ups and downs are just opportunities,” he said. “And our rule is to make sure that we keep laying eggs, no matter what, no matter how the stock market changes in short term.”