Impact of COVID-19 Hits US Companies' Q1 Earnings Hard... Negative Outlook for Q2 as Well

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] The first-quarter earnings of major U.S. companies were directly hit by the impact of the novel coronavirus infection (COVID-19). Observers expect the full impact of COVID-19 to be reflected in the second quarter, with future prospects expected to be even more negative.

On the 28th (local time), automobile manufacturer Ford announced a net loss of $2 billion (approximately 2.4 trillion KRW) for the first quarter of this year. Sales were $34.3 billion, down 14.9% compared to the same period last year. EBITDA recorded a loss of $632 million. Ford forecasted that EBITDA would worsen to $5 billion in the second quarter.

The airline industry, which was hit hard by the sharp drop in demand due to COVID-19, is in a similar situation. On the same day, Southwest Airlines announced a net loss of $94 million for the first quarter. This is the first quarterly loss since 2011. Operating income was $4.2 billion, down 17.8% compared to the same period last year.

Southwest Airlines stated, "Passenger demand significantly decreased not only in the first quarter but also in April," and added, "Operating income is expected to decrease by 90-95% in May as well, so the second-quarter performance outlook is also pessimistic."

3M, which had hoped for a performance rebound through mask production, also posted results that fell short of expectations. 3M's first-quarter sales increased by only 2.7% year-on-year to $8.1 billion. Although demand for masks increased, sales of office supplies such as Post-it notes declined. 3M announced that it is withdrawing its performance forecast for this year due to the uncertainty caused by COVID-19.

Starbucks also reported that its first-quarter sales decreased by 10% year-on-year due to store closures and business suspensions caused by COVID-19. Net sales were $6 billion (approximately 7.3 trillion KRW), down 5% compared to the same period last year. Starbucks also did not provide an annual performance forecast for this year.

Meanwhile, The Wall Street Journal (WSJ) reported that 83 U.S. companies and investment funds have suspended or canceled dividends since the beginning of this year.

This content was produced with the assistance of AI translation services.