Companies Struggling to Quantify COVID-19 Impact

Reports from China show COVID-19 is having a significant impact on the country’s economy. According to the China Passenger Car Association, car sales have plummeted by 92% during the first two weeks of February. A survey of small and medium sized businesses conducted by the Chinese Association of Small and Medium Enterprises revealed that over 85% of respondents believe they will run out of cash in less than 3 months. The IMF believes the epidemic will reduce China’s growth rate to 5.6%, the first sub-6% reading since 1990.

The world’s largest companies are struggling to quantify the potential impact from COVID-19. Since China alerted the World Health Organization that dozens of people had fallen ill to an unusual pneumonia in Wuhan on December 31, 125 of the 150 largest companies in the world have reported earnings. According to our analysis of the 125 quarterly reports and subsequent investor calls with analysts, just 6% have quantified its impact. These companies have reduced quarterly earnings guidance by approximately $220 million due to COVID-19 demand or supply disruptions. For perspective, this figure represents less than 0.03% of the group’s trailing 12-month earnings.

Just under half of the companies have mentioned COVID-19 in their earnings reports or on investor calls. As Chart 1 shows, COVID-19 first appeared in earnings reports in mid-January (prior to this, most companies principally concerned with the U.S.-China trade war). Now virtually every earnings report mentions COVID-19.

Over 15% are experiencing reduced demand or see the possibility of reduced demand and 12% noted current or potential supply chain disruptions.