Earnings: Banks Reported More Provisions for Bad Debts, Netflix Q3 Subscribers Outlook

Given the uncertain environment, investors are currently bracing themselves for a gloomy earnings season. The earnings season kicked off with big banks like JP Morgan Chase, Citigroup, Wells Fargo, Goldman Sachs, Bank of America, Morgan Stanley, and tech stock like Netflix.

Monday

PepsiCo, Inc (PEP)

PepsiCo products are enjoyed by consumers more than one billion times a day in more than 200 countries and territories around the world. However, demand for the company’s products was expected to take a hit due to social distancing measures that halted many large gatherings or activities such as concerts and sporting events. However, despite the tough challenges, the company saw resilience in its global snacks and food business. PepsiCo’s reported a fall in net sales fell 3.1% during the second quarter. The Company earned and an adjusted $1.32 a share as revenue fell 3.1%.

Tuesday

On Tuesday, we saw the first set of quarterly reports for major US banks like JP Morgan, Citigroup and Wells Fargo. As expected, those banks made more provisions of loan losses given the ongoing pandemic crisis. In total, those banks have set aside a total of $28 billion for bad loans in the second quarter.

JP Morgan Chase & Co (JPM): Net revenue was $33.8 billion, up 15%. Net interest income was $14.0 billion, down 4%, with the impact of lower rates predominantly offset by higher net interest income in CIB Markets and balance sheet growth.

Citigroup Inc: Net income for the second quarter 2020 of $1.3 billion, or $0.50 per diluted share, on revenues of $19.8 billion. This compared to net income of $4.8 billion, or $1.95 per diluted share, on revenues of $18.8 billion for the second quarter 2019. Net income declined 73% from the prior-year period, driven by substantially higher allowance for credit loss reserves.

Wells Fargo & Co: Net loss of $2.4 billion, or $0.66 per diluted common share, for second quarter 2020, compared with net income of $6.2 billion, or $1.30 per share, for second quarter 2019, and $653 million, or $0.01 per share, for first quarter 2020.

Wednesday

Goldman Sachs Group Inc (GS)

The Company reported net revenues of $13.30 billion and net earnings of $2.42 billion for the second quarter ended June 30, 2020. Net revenues were $22.04 billion and net earnings were $3.64 billion for the first half of 2020. Diluted earnings per common share (EPS) was $6.26 for the second quarter of 2020 compared with $5.81 for the second quarter of 2019. Like JP Morgan, Goldman Sachs managed to offset the loss in loan provisions with bond trading.

Thursday 

Bank of American Corp (BAC) Morgan Stanley (MS)

Similarly, both banks made substantial provisions for loan losses. However, Morgan Stanley stood out on Thursday after posting strong trading revenue and better-than-expected earnings. The Company reported net revenues of $13.4 billion for the second quarter ended June 30, 2020 compared with $10.2 billion a year ago. Net income applicable to Morgan Stanley was $3.2 billion, or $1.96 per diluted share, compared with net income of $2.2 billion, or $1.23 per diluted share, for the same period a year ago. The Company’s share price finished the day 3% higher to $52.64 after the release of strong earnings.

Johnson & Johnson (JNJ)

The Company reports sales of $18.3 billion reflecting a decline of 10.8%, primarily driven by the negative impact of the COVID-19 pandemic. An EPS of $1.36 decreased 34.6%; adjusted EPS of $1.67 decreased 35.3%; 2019 included gain from the sale of Advanced Sterilization Products (ASP) business. Overall, the Company provided stronger-than-expected quarterly earnings and its share price traded slightly higher by 0.7% at $149.25.

Netflix Inc. (NFLX)

Netflix was among the first to issue quarterly updates among the big tech stocks. The streaming giant reported positive second-quarter earnings after the market close on Thursday, but the warnings came from the predicted paid subscribers which are forecasted to be only 2.5m in the third quarter. The Company fell by 10% or so in after-hours trading.

Source: Bloomberg

As the week comes to an end, Snap Inc will be in the limelight. The Company will hold its quarterly conference call to discuss second quarter 2020 financial results on Tuesday, July 21, 2020 at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time).