Monday Musings: July 13, 2020

Jul 13, 2020

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Public Trust Credit Team
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Corporate earnings kick-off with the bar set very low

This week brings the beginning of the earnings season, and expectations are low. Market consensus for the S&P 500 projects a 5% YoY decline in revenues, 40% YoY declines in EBITDA, and 34% YoY declines in earnings. The low bar for earnings is unsurprising given the tone of Q1 earnings, and we expect results to be painted by the cyclical declines due to COVID-19 across industries. The Credit Team is looking for guidance on returns to shareholders, primarily because many companies in our universe have suspended share buybacks. Dividends have also been cut at the fastest pace since 2008, but it is important to note that this has been concentrated outside of the high-grade market. While expectations are low, sentiment on the street is that we should see fairly significant beats that may lead investors to reassess the resiliency of U.S. corporations through the pandemic.

The FDA provides fast track designation for two potential COVID-19 vaccines

This week, two potential COVID-19 vaccines in development through a partnership by Pfizer Inc and BioNTech SE received fast track status by the FDA, a process that readily moves forward the regulatory process for drug approval. The two candidates at hand, BNT162b1 and BNT162b2, use technology akin to Moderna Inc’s potential vaccine candidate that received the same status in May. Preliminary results reveal healthy volunteers had developed higher antibodies over those observed in infected patients. The joint effort anticipates a phase 2b/3 trial that could start later this month with approximately 30,000 subjects involved. Presently, there are no approved vaccines for COVID-19.
All comments and discussion presented are purely based on opinion and assumptions, not fact. These assumptions may or may not be correct based on foreseen and unforeseen events. The information presented should not be used in making any investment decisions. This material is not a recommendation to buy, sell, implement, or change any securities or investment strategy, function, or process. Any financial and/or investment decision should be made only after considerable research, consideration, and involvement with an experienced professional engaged for the specific purpose. Past performance is not an indication of future performance. Any financial and/or investment decision may incur losses.

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