Earnings: Blackstone, Lilly, Union Pacific
KEY TAKEAWAYS from the post-market earnings:
- Intel Corp. withdrew its full-year sales forecast, citing “significant economic uncertainty” caused by the Covid-19 pandemic. Shares dived lower in post-market trading even though first-quarter revenue and adjusted profit topped estimates. During the call, the company said it expected strong demand from cloud companies to continue in the second half of the year.
- Bank OZK shares were weak after quarterly profit plunged and the lender saw an increase in loans and deposits, in line with other large and regional banks. The firm set aside $117.7 million for credit losses, up from just $6.7 million a year ago.
- FirstEnergy Corp. affirmed its full-year guidance, as utilities are seeing seeing robust demand from residential use with millions of people stay locked inside their homes. However, that didn’t offset the decline in usage from commercial and industrial customers. Total power demand slumped 6% from mid-March through mid-April. And side from lower sales due to lockdown orders, the utility also said mild winter weather affected power demand.
- People’s United Financial Inc. shares were in the green after it reported an increase in net income. Still, the Bridgeport, Conn.-based bank joined other lenders in reporting an increase in both loan and deposit balances for the quarter.
- Capital One Financial Corp. said it more than tripled reserves for souring loans from a year ago, prompted by the coronavirus pandemic and a drop in oil prices during the first quarter. CEO Richard Fairbank said spending on the firm’s cards was up about 7% in the first quarter, but that’s changed in April. So far this month, weekly spending is down about 30% compared with the same period a year ago.
- E*Trade Financial Corp. said January, February and March marked its three highest individual trading months ever, according to CEO Mike Pizzi. The brokerage hit a record number of net new accounts, reaching 363,000 in the first quarter.
CAPITAL ONE (COF US)
Now that we’ve had some time to digest the results from Capital One, here are the key takeaways:
- The company is pulling back its massive marketing arm to avoid the “heightened risk of adverse selection” that comes with offering consumers credit-card loans in a recession, CEO Richard Fairbank said. That means the company will reduce online, direct-mail and national advertising efforts.
- As much of the U.S. remains under shelter-in-place orders, the firm has seen weekly spending on its cards drop 30% in April, after that metric held up relatively well during the first three months of the year. The drop will effect the fees it collects from merchants each time a consumer swipes a card at checkout.
- Total provisions more than tripled and the company increased its allowance for credit losses due to the pandemic as well as the tremors in the oil market. The firm’s $6.2 billion oil and gas portfolio saw net charge-offs soar to 11%, compared with 5.1% at the end of the year.
- Capital One also confirmed that it did ask the Commodity Futures Trading Commission for a waiver that would give it temporary relief from being designated as a major swap participant. The firm has a business that does some commodities trading on behalf of oil and gas customers, and the recent price volatility could have compelled the company to register for the designation. But Capital One says the market misunderstood the move, so even though the company got the waiver it’s not going to rely on it.
- Fairbank said the U.S. consumer was in much better shape heading into this crisis than it was before the last one. He said he’s seen people “battening down the hatches” a bit, increasing their savings and paying down debt if they can.
INTEL (INTC US)
Here are some KEY TAKEAWAYS from Intel’s first-quarter results:
- The mass transition to working from home provoked a big spend on the infrastructure needed to keep people employed as they sheltered at home. That help drive a spike in orders for chips that are the central component in laptops and server machines.
- Intel’s stock fell in extended trading after it gave a weaker-than-predicted profit prediction and withdrew its annual revenue forecast citing “significant economic uncertainty.”
- Analysts expressed concern that the first half of the year was the peak and peppered the company with questions on why profitability isn’t better and what might happen in the second half of the year.
- Company executives said Intel is taking charges related to increasing production of new chips, cautioned that the surge in spending on servers by governments and companies might not continue and said it will be disciplined in its response to near-term market conditions.
- Intel said it’s spending $100 million to help employees with working from home. The company said it’s delivered 90% of orders on time.
17:59 Market Check
As we approach the top of the hour, here’s another look at the shares of the companies we’re following. Lots of red, except for People’s United.
A few more headlines from Capital One call:
- CEO: Capital One Is ‘Tightening up’ on Hiring in Downturn
- CFO Confirms It Asked CFTC for Swaps Participant Waiver
- CFO Says It Has Told CFTC It Won’t Rely on Waiver
- Capital One Says It Has No Outstanding Margin Calls on Oil Hedges
Some more headlines from the Intel call:
- GDP Slowdown to Outweigh Working From Home in PCs
- Expects Strong Demand From Cloud Companies to Continue
- Cloud Demand May Continue Into Second Half
Capital One’s earnings call is still underway. But here’s some of the highlights we’ve heard so far:
- Within the bank’s card portfolio, about 1% of active accounts have entered into a forbearance program. Within the bank’s auto lending portfolio, about 9% of customers have entered into the deferral program.
- CEO Richard Fairbank noted spending on the firm’s cards was up about 7% in the first quarter but he said that’s changed in April. So far this month, weekly spending is down about 30% compared with the same period a year ago.
- The firm abandoned its guidance. Capital One is not a firm that typically gives future guidance – so analysts were surprised last year when it offered a forecast to lower its operating efficiency ratio (a measure of how much it costs to produce a dollar of revenue) by 2021. But with the uncertain environment, Fairbank says the company isn’t able to predict when it will be able to make good on that earlier outlook.
- The company saw a lot of commercial clients seeking to draw down their credit lines and that activity peaked in March. But it’s subsided in April.
- “There are certainly challenges ahead for the economy, our customers and for Capital One,” Fairbank said as he wrapped up his comments. “It’s hard to predict how great the challenges may be or how long they may last.”
Here are some KEY TAKEAWAYS from utility FirstEnergy’s first quarter results:
- The massive nationwide lockdown is definitely dragging down electricity consumption. With so many people sitting at home, working on computers in the day and streaming video content at night, the company reported a 6% boost to residential power demand. But that didn’t offset the 13% decline in usage from commercial and industrial customers. Total power demand slumped 6% from mid-March through mid-April.
- Mild winter weather also was a drag on power consumption. Total electricity distribution in the first quarter was down 7.8% from a year earlier.
- Despite the uncertainty from the coronavirus, the utility affirmed its full-year guidance. Another utility, NextEra Energy, did the same thing Wednesday. Higher residential demand is cushioning the impact of lockdown orders on power companies, and they may be better poised than other sectors to weather the impact of the virus