- The travel environment has deteriorated with multiple travel companies withdrawing guidance just weeks after initially providing it
- With a decrease in tourist sales, US retail is watching the situation closely as domestic case volume increases
- Stresses in credit are becoming evident with companies pulling on revolvers and US Bancorp commenting on the potential for credit quality pressure
- Companies beginning to talk about cost cutting measures
Week of 3/9: Live Updates
3/12 Commentary: We’re hearing more widespread effects of Coronavirus across multiple industries and regions. US Bancorp spoke to the potential of credit quality pressure in Energy, Transports, and Travel. We’ve seen companies such as Hilton draw down Revolving Credit Facilities. Even companies like Visa are taking cost reduction measures.
TransUnion (3/12 – Bank of America Securities Information Services Conference)
So, certainly, we’re doing our part there now in terms of the impact that we’ve seen because of the coronavirus and our business, you know, I can say that overall the company continues to perform well. We feel like – we feel comfortable with the guidance that we provided for the first quarter.
And you know when we look to our Asia business while we get experience some – I mean more or less we’re – we’re performing as expected there when we look at our Hong Kong operations. Now, Hong Kong while part of China is certainly not the heart of virus concerns on the three-point kind of severity scale, it’s a level one environment. And you know the good news is that business has performed fine. However, it may not be the perfect benchmark for the rest of our portfolio. There’s more higher subscription component in that business, but at this point I think – I think we’re holding up quite well. And if anything, we’ve really benefited from the lower interest rates because a good portion or a decent portion of our portfolio has some mortgage exposure. It’s about 8% and we’ve seen quite a bit of growth in that due to the low interest rates and the refinance boom that it’s driven. So I’ll pause there. That’s what we have experienced kind of to-date in the first quarter.
CVS Health Corp (3/12 – Barclays Virtual Global Healthcare Conference)
So, just to give you some color, each of our business leaders are working to ensure business continuity plans are in order to meet the needs of our customers. In terms of that, as we think about pharmacy supply, we’ve experienced no disruption at this point. We’re in close contact with all of our suppliers. And, what they’ve shared with us is, they tend to carry on average, three to six months of inventory. And, I would say, given our size and scale and the power of Red Oak and the diversity of our suppliers, we think we’re in very good shape at this point. We also are able to have, I’ll say, additional information around API sourcing and what have you to enable us to be proactive on that front.
As you look at what we’ve done to ensure consistency of care, everyone probably saw our announcement of offering zero co-pay telemedicine for visits for any medical reason, not just specific to COVID-19. With the goal of eliminating potential exposure in the physician offices or with others, we have waived our out-of-pocket costs for all diagnostic testing related to COVID-19 for all of our Aetna plan members.
And finally, as you look at the front store of our business, clearly, we’ve seen an increase in utilization in certain categories, particularly around cleaning supplies, masks, sanitizers, those types of categories. And, overall, from a supply perspective, our front store supply remained strong. We have had challenges. I’d say, we’re essentially out of stock on masks. And, you could see, on sanitizers, sporadically, we’re out of stock. But, we’re continuing to receive supply…
So, let me take a step back from the quarterly guidance and just talk about the full year from a – for a second. Overall, with everything we know today, we’re confident with our full-year adjusted EPS guidance range that we have provided of $7.04 to $7.17. Obviously, as I said a few minutes ago, right, coronavirus is fluid. There are some positives there. There are some challenges. But, with everything we know today, we’re confident with that range.
Dollar General Corporation (3/12 – Form 8-K)
Based on information currently known by management, the Company does not anticipate that supply chain disruptions experienced to date as a result of the coronavirus outbreak are likely to have a material impact on its fiscal 2020 financial results. However, the Company continues to monitor this evolving situation, and there is no guarantee that this outbreak will not have a more significant impact on its business.
Caterpillar Inc (3/11 – CONEXPO Conference)
So, in our top 25 suppliers, for example, at the moment, only 3 of those are Chinese vendors, so that is a signal. But obviously we don’t know, the other 22, where their supply chains go.
And so obviously if you’re thinking about a coronavirus type impact, particularly on the supply chain at this stage, we haven’t really seen anything. But obviously we are planning on the assumption that at some stage, some of those smaller Chinese manufacturers will have some impact somewhere along the line and building our contingency plans ready. And then obviously where we are sole sourced, that is the greatest area of risk and that’s obviously going to get the greatest degree of attention in the short-term.
Those places where we have alternative supply choices, we will continue to monitor those as well and obviously flex those through over the next few months. But obviously what we don’t want to do is end up in a situation where we either can’t produce or we are constraining ourselves on production. We have lived with that a little bit over the last couple of years. That has been a big challenge for us. So that’s a really big opportunity for us to unleash the supply chain a little bit better than we had done recently.
Hilton Worldwide Holdings Inc (3/11 – 8K)
Hilton increased its borrowings under the Revolving Credit Facility as a precautionary measure in order to increase its cash position and preserve financial flexibility in light of current uncertainty in the global markets resulting from the COVID-19 outbreak.
Moody’s Corp (3/11 – Investor Day)
We remain confident in our performance in the near-term, while acknowledging some uncertainty over the medium-term. We expect the lost revenue due to delayed issuances will reduce MIS’ top line growth in 2020 along where we guided to in February. As a result, we have revised our full-year 2020 MIS revenue guidance from mid-single-digit growth to the low-single-digit percent range. With the exception of MIS revenue, we have also announced today that we are reaffirming all other full-year 2020 guidance metrics. However, we are now expecting to be at the lower end of our adjusted diluted EPS range of $9.10 to $9.30.
We recently revised down our economic forecast to reflect the global spread of the virus and slower economic activity particularly in the first half of this year. Our new base case growth forecast for the G-20 economies was lowered 30 basis points to 2.1% in 2020.
The full extent of the economic costs (00:08:20) will be unclear for quite some time. The spread of the virus has already resulted in significant economic fallout with channels to credit affecting a range of sectors. The fear of contagion has dampened travel and tourism and will dampen consumer and business activity and disrupt the supply chain. It also takes a toll on healthcare systems with higher demand for healthcare services and products.
The fall in oil prices and other commodities now exacerbated by decisions by OPEC, Russia and other producers create new uncertainties for oil and gas companies and related sectors. Several sectors including airlines, shipping, bricks-and-mortar retail, hotels and cruise lines are already facing direct effects to their revenue, cost and finances. In addition, the impact of lower growth has hit oil and commodity prices, while supply chain disruptions are hurting manufacturing companies, including those in the auto sector.
There are some positive impacts, for example, remote communication, online retail, vaccine developers and others. With this slower economic growth outlook, we also raised our default forecast. Our global speculative-grade default rate projection will rise from 3.1% to 3.7% a year from now amid risks to growth, commodity prices and financial markets. Some issuers will face tighter financing conditions, particularly if the coronavirus duration and severity is greater than we currently expect.
In a more pessimistic scenario with wider spread, the speculative-grade default rate rises to 9.7%, comparable to the peak in 2002. A key input to our default forecast is the rating distribution. Many companies have taken advantage of easy market access and a stable credit environment in recent years, pushing up corporate leverage and brining many smaller and medium size companies into the capital markets. About 40% of 2019 first time corporate issuers in North America had B3 ratings. That’s twice the percentage during the last recession.
Private equity-owned companies dominate low speculative-grade issuance and ratings on highly leveraged companies are deliberately positioned at single B, reflecting the tighter default risk. These companies are the most vulnerable to (00:10:52) – are the most vulnerable companies to (00:10:54) this market volatility and economic slowdown, and our ratings reflect that. So, we’re actively monitoring sector and issuer-specific shocks, and we’ll update our sector views ratings and overall default forecast as this situation evolves…
So, with this backdrop, we do expect a modest impact to MIS revenues due to some issuers that will postpone their activity in the wake of recent spread widening and market volatility. So, (00:11:34) it is prudent to lower our guidance to the low-single-digit percentage range, even recognizing that the postponed issuance could revive quickly. And while there’s still a lot of uncertainty in exactly how this current scenario will play out, we do believe that this is a story of near-term turbulence versus long-term opportunity.
DuPont De Nemours (3/11 – J.P. Morgan Aviation, Transportation & Industrials Conference)
We took $100 million out from our prior guidance and that’s all related to the coronavirus. So we’re losing $100 million in sales due to the virus, again, the impact on EPS of that is $0.04.
Now, we are highly confident that we’re leaving the EPS range at $0.70 to $0.74, which is what we’ve said on the fourth quarter call. And we’re making up that $0.04 with additional cost actions mix enrichment that we’re having in a couple of our businesses, and one I would highlight right now is, obviously, our protective garment business, which is made of Tyvek, which is a nice margin business for us that is obviously shipping more than we would have before because of the virus.
Let me give you just a little color on each of the segments. And I’m going to give you the impact of the coronavirus so you can kind of get it by business for those that want to tweak some models around. And let me start with the N&B business. We’re losing about $40 million of revenue, $15 million of EBITDA, and that’s, again, just because of the virus, and that several of our customers’ factories were down in China, so we weren’t shipping to them. And I don’t expect that we’ll recover that in the quarter in N&B, the business is kind of lost.
In T&I, it’s about $40 million revenue impact, $15 million to EBITDA, mainly into the auto business in China. You all know that the numbers are significantly down over there and the February numbers were really bad. And – but we will, in T&I, make it up through mix enrichment and cost actions that we took.
And then in E&I, it’s only about $20 million of revenue, $10 million of EBITDA. We probably lose that for the time being. We might get that demand back later, but we won’t make that up in the quarter. And S&C, Safety & Construction, that ends up being neutral to revenue, positive to EBITDA, again, because the garment sales are so much higher. We do have some weakness in China in the Water business. It’s big in residential over there in Industrial and that is down, but it’s been more than made up on the garment side. So when you wrap the whole thing together, a $0.04 EPS impact from corona, but we make it all up mostly mix, cost actions being taken across the platform.
If I go to the full year, we’ve reduced revenue by $200 million from prior, so it’s somewhat of a minor tweak to the total number, but that’s the $100 million we lose on the sales in the first quarter from Corona and we took about another $100 million out for auto that probably hits in the second quarter mostly just because of things haven’t picked up yet.
From a EPS standpoint, we don’t know how to gauge, obviously, the impact moving forward on corona. If things resolve quickly, we’d be in, obviously, very good shape, but it is a dynamic situation. Obviously, we’re monitoring it daily with our supply chain. So we’re leaving our full year guidance in place. And obviously, we’ll readdress that if we have to when we do our first quarter earnings, depending how things play out over the next days and few weeks…
Emerson Electric Co (3/11 – J.P. Morgan Aviation, Transportation & Industrials Conference)
Okay, good. So relative to coronavirus, relative to China, we’ll start with China first. We are basically at a 100%. We’re 95%, 96% up and running, all of the facilities running. We are getting materials. We are shipping. Shipping is taking a little longer, but definitely we’re shipping out both within the country and outside the country. At this point in time, we are working through the backlog that we built up prior to the Chinese New Year’s and then also through the delay. From the perspective of all employees, none of our employees ever did get sick. And we’ve had probably three or four special inspections from the local officials making sure that we are honoring the commitments from the facilities for a health standpoint.
The big issue right now for us and hence the $100 million to $150 million we put out a couple of weeks ago now, it hasn’t changed, it’s still the same number we see. The big issue for me right now is the demand within China, it’s still below the pace of prior year, and our forecast which – that’s what we’re trying to compensate with this $100 million to $150 million, and we’ll – every day, it gets better. At this point in time, it’s hard to say when that demand will get back up to the full level. From the state of business for us, the big issue for our customers is around financing money. The government is trying to work with the banks to get the money out, but the big multinationals have no problem with money, it’s typically our small and medium-sized customers that have that problem.
Around the world of coronavirus, all facilities are up and running, including northern Italy, we have a lot of northern Italy facilities. We have close to 1,800 people in northern Italy in 20, 30 manufacturing facilities or sites not manufacturing. I think we have 3 or 4 manufacturing facilities. They’re all running, we’re shipping. Italy for us is around $300 plus million in sales and we do ship a lot out of Italy into the Middle East and Africa region. So far, we’ve not had any disruptions, but clear that is the one area that is still moving relative to controls in coronavirus.
Huntington Bancshares Inc (3/11 – RBC Capital Markets Financial Institutions Conference)
While most of our customers are yet to feel material effects, all have seen the unprecedented low levels of interest rates and the rapid sell-off in equity markets, both of which raised the specter of a near-term recession…
The visibility we have into just how long the situation will last and how deep the economic impacts will be felt is low. On one hand, there are clearly reasons to be concerned. On the other, we also know the possibility of the virus will be contained and that we will see a recovery to a more normalized environment over the course of 2020. In addition, there is the potential for positive effects on the broader macroeconomy from lower interest rates and gas prices, as well as government support actions. We are taking steps in our business, including efforts to manage our revenues through deposit, interest rate reductions and loan production mix; actions to reduce our expenses while preserving our critical long-term investments; continuing our credit underwriting posture consistent with our aggregate moderate-to-low risk appetite; and ensuring the safety and soundness of the institution is maintained.
Given the uncertain environment, I will not be providing updated full-year 2020 guidance today. However, I will walk through some of the trends we’re seeing and expand on the actions we’re taking. In times like this, the temptation is to focus solely on the volatility, the distractions around us. However, we have a company to run and strategies to execute and we are doing so.
Mettler-Toledo International (3/11 – Barclays Virtual Global Healthcare Conference)
As you can imagine, the overall situation continues to evolve and change very quickly. And the spread of the virus has also, obviously, created a lot more uncertainty since our earnings release last month.
So, in terms of supply chain in China, overall, we feel pretty good about the situation in terms of our production capacity and in terms of our end-to-end supply chain processes. Our production workers are back to work and we’re currently around full capacity. As I mentioned, things can change quickly and it’s a very fluid situation. When we see situations like South Korea just in the last few weeks develop, it just shows you how intricate and interconnected the global supply chain can be. Fortunately, for us, we don’t have any significant exposure to electronic components but, of course, created a couple of topics for us to address. But, to me, I just more so highlighted as just an example of how things can change very quickly from day to day on the global supply chain despite the fact that today, we feel actually pretty good about the overall situation.
I think another thing when we reflect on the supply chain, it is one of the things that we can control better than customer demand and we tend to feel better about the things we can control. And I do think we also benefit from our very strong leadership team, as well as our organization in China. We’ve often talked about the strength of this team in the past. And if you even just look at the tenure of our Chinese leadership team, I think the average tenure with Mettler-Toledo is over 15 years. Many of these leaders managed our business through the SARS situation. And so, ever since the first conversations on day one, I think they were certainly familiar with how to handle such a situation and immediately launch into business continuity planning.
The second part of the situation is China demand. This one is, obviously, a little bit more difficult to assess at this time. When we provided guidance a month ago, we had a handful of different considerations. Overall, we assumed that we would lose some working days related to the different government restrictions whether it’s regarding travel or the ability to not work in the office or in the production facility. And we also had assumed that there would be lower productivity from a customer perspective given the lack of customer-facing activities after February 10. We didn’t have any specific algorithm in terms of, like, exactly what the productivity would be by day. But, overall, we did feel like the month of March would be a very important month and that we would start to make up for some of those lost workdays and lack of productivity in the month of March. So, accordingly, for us, March is going to be a very important month. And as I said before, the situation continues to be very fluid and difficult to estimate.
When we do look at China though, we do want to also highlight we also benefit here from our e-portals, we benefit also from our tele channel. We have over 100 people in inside sales, telesales and telemarketing and we have been working with this group throughout the Chinese New Year and kind of preparing them to launch various marketing campaigns right after February 10. And I think we also benefit in China as we do globally from the diversity of our business whether it be the diversity of our customers, our products or even the applications in which we serve.
And maybe a final comment on China, we did expect when we provided guidance last month that the government will stimulate the economy and we would anticipate some benefit during the second half of this year. At this time, it’s still unknown in terms of the timing and the magnitude of such a stimulus. But we would certainly expect there to be stimulus. I think they’ve been vocal about that. And when they do, we would expect to see some form of benefit in both our Laboratory, as well as our Industrial businesses.
In terms of demand outside of China, this is clearly a very fluid situation as well. We did not anticipate the spread of the virus outside of China in our previous guidance. We’re, obviously, very alert to the situation. We’re closely monitoring it and we’re also initiating various different business continuity plans in different countries around the world, very similar to how we approached the Chinese situation early on. I would say that there is certainly different potential outcomes with the spread of the virus, but overall, I would say it’s too early to judge for us at the moment and March will also be, I think, a very important month to see how things develop and expect we’ll have a little bit of a better handle on the situation as we kind of finalize the quarter.
The Western Union Company (3/11- Wolfe Research FinTech Forum)
Yeah. I mean, we’re not going to restate guidance at this stage because that was given in February, and we’ll give you our first quarter results in early May and we’ll give you the latest that we’re seeing. But with respect to the coronavirus, we have not seen a material impact as I mentioned, and then we’ll see how the oil price situation works out. But again, we have some natural offsets in our business as those things play out.
M&T Bank Corporation (3/11 – RBC Capital Markets Conference)
So it’s a little too early to see the actual impact on our balance sheet, but we’ve been out in a very diligent way. All of our RMs are talking to customers very actively, and that covers lots of portfolios. But we’ve got a special emphasis on healthcare, where we have maybe about $6 billion of loans in assisted living facilities, basically senior housing and those types of things. And then, we’re staying focused on hospitality. So think there of about $4 billion of real estate around hotels and so forth.
Sherwin Williams Co (3/11 – J.P. Morgan Aviation, Transportation & Industrials Conference)
We do not have any changes to that guidance at this time as the impact of the virus is not currently material to our consolidated results. For The Americas Group, we expect it to be at or above the high-end of the first quarter sales guidance. We’re on track for that through February, and March which is the largest month in the quarter has started off as expected.
The Consumer Brands Group first quarter and full year 2020 sales were expected to be flat to up slightly, excluding the impact of the Ace business we exited in 2019. We’re seeing a short-term impact of sales due to the virus in China. But again, all of Asia-Pacific sales for Consumer represents approximately 7%. Our Performance Coatings Group’s sales in our first quarter and full year were expected to be up low single-digits with industrial demand to remain variable by geography and end market. We are obviously seeing that in our first quarter. The virus will have an unfavourable impact on the first quarter sales for this segment. But we do not believe it is material enough to update our guidance.
Johnson & Johnson (3/11 – Barclays Virtual Global Healthcare Conference)
I would say, first of all, Johnson & Johnson being the global healthcare leader it is, is closely monitoring the coronavirus situation and we’re trying to take steps to prevent, first of all, help the spread of the virus as well as exploring the potential for a vaccine. I think you know that we have a division in our pharm organization that is very much involved with vaccines in regards to Ebola, but also now with the COVID virus.
As you can imagine, we’re closely monitoring the coronavirus situation of – an area of impact and interest certainly for you all is manufacturing. Our manufacturing centers are producing Medical and Pharmaceutical products, as we speak. Also, in China, to a large extent, we’re back online and producing products. Of course, we’re in close alignment with the Chinese government to ensure that we can continue to provide and supply critical products to our customers.
The impact that we are seeing is more on elective procedures. As you can imagine, in China, Japan and South Korea, the impact has been meaningful. Those procedures are starting to come back online, but I would say, they’re not back to historic levels. We’re starting to see a similar trend in certain parts of Europe. And in the US, I would say, we’re in the early innings of this whole event evolving. It’s a fluid situation I would say. We’re closely monitoring it.
US Bancorp (3/11 – RBC Capital Markets Conference)
The areas that we’re watching are the ones that are most directly impacted by the coronavirus, so you have airlines and transportation, you have the hospitality industries, energy maybe not quite so related to the coronavirus but certainly has been in the news recently.
And then anything that really is kind of dependent upon the supply chain relative to China and those areas. With respect to, for example, airlines it’s a relatively small exposure for us. It represents about 0.5 percentage point just in terms of airlines, transportation overall is a little over 1%. So when you end up looking at each one of those exposures, very manageable from our perspective, but there’s going to be credit quality pressure I think in those particular spaces at least in the short-term. And I think a big part of that is just how long this pan epidemic continues.
Visa Inc (3/11 – Wolfe Research FinTech Forum)
As it relates to our business and the spending trends, as you said, we released an 8-K last week on March 2nd. As you know and everybody’s been tracking, since then, the virus has continued to spread to countries outside of Asia. As we expected, spending has continued to deteriorate especially in travel. We factored this continuing deterioration during the month of March into the updated Q2 revenue projection that you referenced a moment ago and we included in our 8-K. And just given the recency of the spread and the impact that we’re seeing on spending, it’s honestly too early to tell what the overall impact is going to be. As I think you would expect and you would hope in terms of expenses, we’re doing a number of things inside our company. We’re taking a series of actions to reduce expenses where we think it’s smart and it’s not going to impact the health of our business certainly in the medium to the long term. We continue to believe and I look forward to talking about a tremendous set of growth opportunities that we have for the company and we outlined on Investor Day.
So they’re in, listen, the situation is very fluid. There’s no question we continue to monitor it very closely. Given the uncertainty surrounding the magnitude, duration, the geographic reach of the impact, we’re going to give an update of our views for future quarters and the full year for 2020 on our earnings call in April.
Rockwell Automation Inc (3/11 – J.P. Morgan Aviation, Transportation and Industrials Conference)
In China, we have plants in Harbin which is way up in the Northeast, and as well as in Shanghai. People are back to work and our production in our plants is keeping pace with current demand. From a supply chain standpoint, we mentioned before that some of the supply chain actions that we took to mitigate tariff impact are actually benefiting us now based on the current environment.
It’s still a very fluid situation, and we’re working with suppliers in all regions to mitigate any potential disruption or lead time increases. And we’re selectively increasing our inventory levels of some components and products to protect the supply for our distributors and our customers. And I should mention that all our distributors in China are back to work.
In terms of China order intake; for reference, China is about 6% of our total sales. There’s a clear impact, as you would suspect, of coronavirus in China particularly in February. But in the end of February and into early March, we did see some weekly sequential improvement in order intake. We expect China to be down versus expectations year-over-year in quarter two, but it’s too early to determine the fiscal 2020 impact as we assess what sales were lost versus delayed.
From a rest of world standpoint, North American product sales through last week were encouraging, but obviously, March will be key with respect to our worldwide Q2 performance. So, that’s a little bit of a rundown with some additional information, Steve.
Citigroup Inc (3/11 – RBC Capital Markets Conference)
And so as I sit here and think about it, I think the prospect of slower growth and an impact on growth more broadly is certain. When you can see it, when you look at – if you just look at Asia and you look at the manufacturing production numbers that are coming out of Asia, we can look at the purchase sale volumes coming out of Asia. We can look at corporates adjusting their expectations. Gerard, the simple fact that we’re doing this conference call via virtual, we’re doing this conference via virtually is again evidence that there’s going to be an impact from many of these macro factors that are out there.
And then there’s the other piece, which is how this plays out across the businesses. We obviously have operations in Asia. With Asia, it represents about 20% of our revenues. About half of that is institutional, about half of that is our consumer revenues. If you think about the countries most impacted, China, Hong Kong, Japan, Korea, they represent about 8% of our revenues. And we’ve seen kind of mixed activity there. Activity, obviously, that involves direct consumer engagement has come to a halt. That said, activity that is geared around the investments we’ve made into digital capabilities, we’ve seen continued good activity there in terms of clients or consumer, customers trading, and what have you, things they can do online versus requiring direct engagement.
On the corporate side, we have a large corporate client base broadly in and outside of Asia, and the impact there will vary depending on the sector. So, certain sectors like hospitality and travel, we’ve seen the impact of that already. On the flip side, we’ve also seen a flight to quality as it relates to deposits. And you’d expect to see that, I think, in uncertain times and we’ve certainly experienced that thus far. We’ve also seen market volatility. So, think about the significant decline in equity valuations, the 10-year being meaningfully down. Those types of things are creating volatility, causing our clients to engage, to take positions. And it, obviously, creates opportunities for us to serve those clients, and that flows through as a benefit in our Markets revenues. And so, there’s a mix of things that are playing through, some puts and takes, as you would imagine.
CSX Corp (3/11 – J.P. Morgan Aviation, Transportation & Industrials Conference)
I mean, we know that there was an extended outage in China. We know there were a large number and abnormal number of vessel sailings canceled. We expect that as a result of that volumes would be down, takes a while for that both cycles to get over to the west coast. And sure enough, it’s – what I did – last week whatever it was down 10% and as it down 20%. It’s kind of what everyone anticipated, the steamship companies at least some of them seem to have an optimistic view of a quicker – quick return to normalcy at least out of China. And so you know we’re prepared if the – you know we’re – if anything based upon all of the changes we’ve made in the way we run the railroad today, we’ve proven the fact that we can pivot a lot faster, are a lot more nimble and can adapt to changes as they are thrown at us. So if more traffic comes to us through our interline partners, with our channel partners, our interline partners and our channel partners from the west, we’re clearly able to like I said pivot and handle that business as well. So we’ve got a great running railroad and capacity to handle traffic changes, whether it comes east or west. I think that’s just kind of the one thing from a railroad perspective, you know one day we’re – one day we’re operating in a polar vortex, the next day we’re operating with mudslides and the next day we’re operating with hurricanes. We’re used to this kind of environment. We’re used to being able to need to change and have been thinking about how to make sure that we’re ready to handle our customer’s products, however, they decide to ship it.
Fifth Third Bancorp (3/11 – RBC Capital Markets Conference)
So, obviously, a lot of our customer – or some of our customer base that has a direct exposure to China pipelines and so forth is concerned. We’re starting to see that pick up a little bit better. But net-net, as this rolls into United States, which is a large portion of our customer base obviously is US-based, is the concern about making sure to take care of the employees, identifying where the risks are, and making sure that they’re protecting their capital and liquidity also as they manage through a very difficult environment….
We haven’t seen evidence yet. We’ve certainly seen – we’ve had a number of conversations with our customers, and if you look at public data about airlines – the expectations about air travel and what’s going to happen from a tourism perspective, we can certainly speculate. But in terms of actual activity in financial results, we haven’t seen that from our customers yet. We’re in active dialogue with them to make sure we understand both what’s happening on the ground from an activity perspective, their liquidity positions working with our customers to make sure that we understand the downside that they are facing and then we stressed that as well.
Cigna Corporation (3/11 – Barclays Virtual Global Healthcare Conference)
Now, in terms of financial impact which is where you went, at this point, we’re not expecting a material financial impact to Cigna overall. As you know, we recently reaffirmed our 2020 earnings guidance and continue to be very excited about our growth across all four of our growth platforms.
In terms of your specific question, as you know, we have businesses both inside the US and outside the US. With our international business, we have both a global health benefits business and a local supplemental benefits business. With the latter, we offer a wide range of supplemental individual products. And as you know, we have quite a material business operations in Asia, in China, and Korea specifically. As it relates to China, what we’ve seen there is we’ve seen lower levels of elective discretionary utilization as people are really avoiding hospitals overall and healthcare facilities. But we’re also seeing some dampening on the revenue side from new sales. But all in all, outside the US, we would not expect a material financial impact to the total enterprise based upon the dynamics.
I think your question and where you referred to some of the other companies was more what was happening within the US. Within our Integrated Medical, we would – very similarly to others, we would really expect to see the coronavirus unfold much like the flu. And as you know, over time, Cigna has never really pointed to the flu as a key driver to our earnings even in years where they’re more severe than other years.
As you size it and we think about it, we think about the full-range impact. In terms of our MCR, medical cost ratio, or medical trend, for us, it’s usually relatively muted. It’s usually in the single- to low-double-digit-basis-point range. So, not a significant event. We continue to see the coronavirus in that context.
Now back to the second part of your question which is, obviously, if this would persist over time, from our viewpoint, we could obviously adjust that in a commercial pricing more quickly and then certainly for our governmental business, on the annual basis. But I would highlight, for Cigna, we’ve historically been less exposed to this – based upon the mix of our business and the nature of how our book of business has been positioned. So once again, I would stress, the flu, for us, high-single-digit, low-double-digit basis point as it relates to our MCR and our medical cost trend.
Boston Scientific Corp (3/11 – Barclays Virtual Global Healthcare Conference)
But happy to talk about the company. The COVID-19, obviously, is getting daily, hourly attention. When we’ve provided guidance for full year, we talked about 6.5% to 8.5% growth on our call. And then, we obviously saw the COVID-19 impact pretty early. So, we tried to do our best to call out a potential negative impact from China back on February 5, which as you said was 10% to 40%.
And so, longer-term, we’re very comfortable with the three-year CAGR we’ve talked about on the 6% to 9% organic growth. I’m sure we’ll talk about a lot of the growth drivers and products. But the COVID-19 has been quite a big challenge for us as it’s – so it is true for almost (00:02:46) everybody. Starting in China, a lot of focus on our employees and our actions there, and you basically saw procedures slowed down significantly in first quarter based on the impact there, most of our reps working from home, leveraging digital tools and the hospitals managing the virus.
And it’s super early. There’s maybe some hopes that the China situation is getting a little bit better, but it’s been significant impact since that call, and obviously, it spread some of the impact to other regions in Asia, in Korea, as well as some challenges in Japan, and obviously in Italy. And as you’ve seen, all of – the (00:03:37) impact in the US with some hospitals preventing sales reps from entering in the hospitals and quarantine situations and so forth.
So, it’s certainly been an evolving situation. When we look at it, we’re doing everything we can to support our employees and our patients. We feel very good about the underlying growth, the core Boston Scientific business ex-COVID-19, but we continue to challenge our work to be (00:04:06) a challenging situation, we’re not going to reiterate our guidance. At this point, we’re not going to update our guidance from that February 5 call and we’ll do that on our April call.
Moody’s Corporation (3/11 – 8K)
“We are revising Moody’s Investors Service’s full year 2020 revenue guidance from mid-single-digit to low-single-digit percent growth reflecting ongoing uncertainty related to the coronavirus,” said Raymond McDaniel, President and Chief Executive Officer of Moody’s. “We will continue to monitor and proactively manage our response to the situation as we work to meet stakeholder expectations.”
Hilton Worldwide Holdings Inc (3/11 – 8K)
On its February 11, 2020 earnings call, Hilton Worldwide Holdings Inc. (“We” or the “Company”) provided an estimated potential impact of the COVID-19 outbreak. As the outbreak has now spread beyond China and the Asia Pacific region, we believe that the potential negative impact will be greater than our previous estimate and have issued a press release to announce that we are withdrawing our previously announced first quarter and full year 2020 outlook. We expect to provide further information during our first quarter earnings call based on information available to us at that time.
Dick’s Sporting Goods (8K – 3/10)
The Company’s outlook balances the enthusiasm it has for its business with the rapidly evolving coronavirus situation. Accordingly, the low-end of the Company’s outlook includes some caution related to supply chain disruption potentially impacting its results beginning in the second quarter.
At Home Group (8K – 3/10)
Mr. Bird continued, “We are also closely monitoring the impact of the Coronavirus outbreak on our supply chain and consumer demand while prioritizing the health of our team members and customers. Given the fluid nature of the situation, we look forward to sharing an update on current trends during our upcoming earnings call on March 24, 2020.”
Macy’s (Bank of America Merrill Lynch Consumer & Retail Technology Conference – 3/10)
Answer – Lorraine Corrine Maikis Hutchinson: Thanks so much, Paula. I wanted to kick things off with a broader macro question. How do you think your core consumer is today?
Answer – Paula A. Price: Well, what I would say, Lorraine, is very similar to what we’ve said before, with the obvious caveat being that our outlook was prior to the COVID-19 outbreak and the oil plunge. So here’s how we think about the consumer fundamentals.
U.S. job, wage and income growth remain solid, which should contribute to consumer spending. But while the consumer environment remains healthy, we do expect slower economic growth overall versus prior years. And so with that in mind, we would expect that we would maintain our relative market share as a starting point for how we think about 2020.
Answer – Lorraine Corrine Maikis Hutchinson: Excellent. The potential impact to supply chains and sales from the coronavirus is top of mind for investors right now. In terms of sales, are you seeing any impact from the softer tourism? And how exposed are you to this revenue stream?
Answer – Paula A. Price: Yes. So I would start by, again, just saying, as I said in my opening comments, that this continues to be very much an evolving process, and we’re getting updates from our teams on a daily basis. And again, first and foremost, our colleagues and customers are top of mind, and we’re taking every precaution there. And so as this continues to evolve and more cases are being identified throughout the U.S., it’s still too soon to quantify what the impact on sales could be. But what we can say is that we’re certainly seeing a slowdown in international tourist sales. And as for the impact from the domestic customer, we’ll continue to monitor that very closely.
Ryanair (6K – 3/10)
Ryanair does not expect these traffic reductions to have a material impact on FY20 (31 March 2020) PAT guidance. It is far too early to assess the impact of Covid-19 on FY21 traffic and earnings. The Ryanair Group will continue to focus on delivering cost savings and improved operational efficiency in FY21. Ryanair is one of the strongest airlines in the industry with €4bn in cash, industry leading unit costs, 90% of the fleet is owned with over 70% debt free.
Royal Caribbean (8K – 3/10)
The company had previously communicated that its 2020 guidance did not include the impact of the COVID-19 outbreak. Given the recent government actions and the heightened impact and uncertainty of changes in the magnitude, duration and geographic reach of COVID-19, the company is withdrawing its first quarter and full-year 2020 guidance.
Quest Diagnostics (Barclays Global Health Conference – 310)
Question – Jack Meehan: Just wanted to start, Mark, with the here and now obviously, the topic de jure has been the coronavirus. I was curious if you could weigh-in just how you expect this to impact the business and demand for testing services and have you seen any increased testing rates so far related to the new test?
Answer – Mark J. Guinan: Right. Thanks for the question, Jack, and pleasure to be on the phone here. What we’ve shared publicly is that we started yesterday with specimens collected yesterday in California, at our Esoteric Lab in San Juan Capistrano, we’ll be ramping up capacity. There’s a validation process across multiple pieces of equipment and then across multiple sites. It’s going to take us several weeks to maximize our capacity through that validation process across the 2 Esoteric sites and then some — we do have some of that equipment, we’re using in some of our regional labs, and Steve shared yesterday in an interview that within several weeks, we expect to be able to do several tens of thousands of tests a week.
Now we’re all speculating. So I have no idea what demand will be. But based on the discussion that took place in D.C. last week with the Vice President — or with Secretary Azar, the sense is that the demand could far outweigh capacity even with us and our — the international lab and multiple regionals and hospitals all ramping up as quickly as possible that it is a race to increase capacity. So we’re not in any way, sizing this, and saying, we think we’re going to get x, and therefore, we’re only going to create so much capacity. We’re going to create as much capacity as we possibly can as quickly as we can. And then, obviously, monitor the incidence rate and see if we need to slow that down, but we’re not at all being cautious.
The next phase, Jack, would be likely, there are several IVD manufacturers who have suggested they have some kits that would be available as well. We’re probably a couple of weeks away from those. If that ends up being accepted and validated, then the next step of capacity would be acquiring some of those kits in addition to the laboratory-developed tests that we’ve already put up and got approval for it through emergency use.
So that’s kind of where we’re at. We’ve shared a couple of instances already where we can’t size this. We’re not going to predict how much testing we’re going to ultimately do. It’s unpredictable. And that we do think there is potential for an offset on utilization because society seems to be changing behavior around certain things. We’re not having this conference in person. That’s a prime example.
And so one could imagine that some people might choose to engage less with the health care in structure for concerns around catching something in the office and the waiting room from the doctor, et cetera. We don’t know. And we’ve already had a couple of investor 101s this morning. I’ve been asked certainly, we don’t share mid-quarter updates. However, if there was anything material that we’ve seen a change in our business, we’d feel obligated to share something. And again, we don’t know. So one thing you might think about is our average patient counter, which is our acquisition is the mid-$40 range. Certainly, the coronavirus reimbursement should at least cover that, if not be a little higher. And so you’d say a one-for-one swap would be about even, but we don’t know how many people is going to be one-for-one and office visits replaced for a corona visit. And then the other question is mix. If people who don’t engage are skewed toward healthy annual wellness check. Certainly, we do a lot of tests in those — the whole battery of chemistries and lipids and blood count and so on, how our seniors are going to react. Seniors consume more of our business. So are they going to be more or less likely to go the doctor, one camp can say, “Hey, for the smallest sniffle, they may rush in because, obviously, I want to get — seriously, I only want to get in-treatment quickly.” And the other thing is they’re the mostly at risk. So therefore, maybe they’re going to mills cautious. We don’t know. So all we can share is some of our thinking, but we can’t quantify any at this point. We just want to acknowledge that. Like other industries, we think that there could be some potential for negative impact to our business if people change their behaviors. However, unlike many other industries, we also will do some testing specifically related to corona.
Teleflex (Barclays Global Health Conference – 3/10)
Question – Kristen Marie Stewart: Obviously — yes. Obviously, the big topic all around here has been coronavirus, the reason why we are virtual today. You’ve said that basically, the amount that you included within your guidance thus far has been a $5 million to $10 million impact. I was wondering if you could kind of talk with us just about any updated forecast you may or may not have? Or just kind of thinking, as you’ve seen the virus spread through different geographies, just how you’re thinking about that today?
Answer – Liam J. Kelly: Yes, thank you. So you’re correct. Yes, we have $5 million to $10 million in revenue in Q1 and an impact of $0.05 to $0.10 associated with the coronavirus. That is based on what we saw when we gave our guidance for the year, and it’s included in our guidance. And it was really the impact that we saw in China. The lower end of that range would have been if China get back to normal in early March. The upper end of that range is contemplated that China gets back to normal in April. Now what we are seeing on the ground, we have 1 small manufacturing plant in China, that has been up and running now for about 10 days and running pretty well. Our office got back to a pretty normal working conditions over a week ago. So yesterday week, our people went back to work in the office. And 2 weeks ago, the individuals that had left Shanghai — so 2.5 weeks ago, in a population of 20 million people, there were only 10 million people living in Shanghai. Two weekends ago, all of those individuals returned. So now there’s 19 million people. Obviously, Hubei is still in lockdown. So the travel was restricted there. But our people tell us that things are slowly starting to get back to normal in Shanghai, which is probably a good indicator for at least the Eastern seaboard, where most of our products are sold and our expectation is that as we go through the month of March that Shanghai, Beijing and large cities like that will get back to some semblance of normality.
Kroger Co – (Bank of America Merrill Lynch Consumer & Retail Technology Conference – 3/10)
From a financial standpoint, it’s too early to tell what the effect will be on our business and it isn’t included in our guidance for 2020, in terms of business preparedness, we have established an internal task force that is activated our pandemic preparedness plan with a focus on our customers, associates and supply chain, we generally believe that we have a limited supply chain exposure in China as the majority of the product we source is domestic.
Laboratory Corp. of America Holdings (Barclays Virtual Global Healthcare Conference – 3/10)
In terms of impact, as I mentioned on the fourth quarter call, we believe the range that we’ve given for guidance will cover what we currently believe the impact to be from the coronavirus. So though there will be some pushes and pulls. We give annual guidance. We don’t give quarterly guidance. But I do believe that there will be some things within the quarter that may occur, particularly if we think about our central lab in China for example where we had quite a backlog as China took an extended holiday through the New Year’s, and therefore that laboratory had a backlog we’re trying to work through that backlog, people are back to work in the laboratory, but whether that happens in the first quarter or second quarter is yet to be determined. In addition to that, in some of Asia and but also in certain parts of Europe we’ve seen clinical trial enrollment slowed down for a period of time. And we see the impact of that as we continue to see the coronavirus in other countries in the world, but we do believe that there may be some impact there. If you look at the diagnostic testing that we do in the United States, we haven’t seen any significant impact of the number of tests, type of tests as we sit here today, but of course we’ll be watching it very closely and when you start to think about people going in for wellness exams for example or going to doctors for routine testing that might slow down a bit even as we coronavirus testing go up a bit in the diagnostic area in the United States. So net-net we still believe that we’re covered with the guidance that we provided in the first quarter but with some pushes and pause across the business, and there may be some quarterly shifting, but we still feel based on where we are today realizing it’s still a very fluid situation that in the guidance.
Reynolds Consumer Products Inc. (Earnings Call – 3/10)
Recently, we’ve seen some retailers increasing orders and higher-than-normal consumer takeaway. We believe that the inventory and pantry load to be temporary, possibly shifting some volume into the near term and then reversing before year-end. Therefore, we don’t expect a material impact from the coronavirus at this time. We will continue to monitor the developing situation and are developing plans to escalate in North America as the virus could have an impact on our operations and supply chain. As we continue to think about ways to adapt to changing consumer preferences, e-commerce is a primary focus for Reynolds. Our products are shelf stable and are cost effective to ship directly to consumers which makes us well-positioned for growth in the e-commerce channel. In our role as the leading CPG company, it is essential that we effect change to establish sustainable business practices. For years, we’ve been focused on sustainability and have created a broad line of eco-friendly products that are better for the earth. We have a team dedicated developing products made with recycled, renewable, and compostable materials including wax paper sandwich bags, compostable paper plates and food bags made from resin using sugar cane as a feedstock. 43% of the products we sell in the US are recyclable and are made from recyclable material. And while we’re proud that we’ve achieved this level, we continue to strive for improvement. Our goal is to reduce 80% of our solid waste in the US operations and design all packaging for recycling by 2025.
It’s really early days of what we’re seeing from commodity costs as a result of coronavirus. Our forward guidance is based on what we’ve seen to-date and are – we believe that if the current prices that we are seeing remain at this level or decrease, there’ll be some modest tailwind for our earnings going forward.
Cardinal Health Inc (Barclays Virtual Global Healthcare Conference – 3/10)
As far as on P segment and the tie it to the coronavirus we do – we had anticipated this a while back so we first saw it in China, our team immediately began looking through our database to see where we either had finished those which very little coming from China but more importantly where there is any raw materials coming from and in particular the Wuhan province where was ground zero for this. There are some raw materials that have nearby province so knowing that we did stock up on some extra inventory on key products that had raw materials coming from that area very early on to make sure that we understood that we – you know what was going on that we could have some extra, we have done this as it’s moved around the world we constantly use our database to understand if we’re going to have any finished good or raw material problems with any of the pharmaceutical items so we looked in Italy when it began to hit Italy et cetera and we continue to adjust our inventory where we can get extra product to stock up to make sure that we’re staying ahead of it. The good news is through our conversations and I’ve had a few myself directly, most of the manufacturers are carrying a few months’ worth of inventory on hand. So feel like at least for the next few months we should be fine to be able to get the majority of items that we need. Now if this were to extend past the early summer then I think everyone’s going to be looking at some potential supply disruptions not only because of the API materials but one of the other piece that’s harder to track because there are so many of them is key starting materials or KSMs so the items that go into the manufacturing of the API. Some of those are have some potential disruptions and so some of the suppliers again are keeping their eyes on those. But tell us so far that they hold several months of APIs, finished dose stock and KSMs and we should – that we should be okay for a few months…
I am — I would say so far we’ve not seen any material price increases that I would say are related to the coronavirus yet. There are manufacturers that are starting to see some price increases on API. And as you know we’ve talked about this in the past, our goal for Red Oak is to never take any price increases. So we’re always going to fight aggressively to make sure that we’re getting after the lowest cost. Now there are times when you sometimes do take them at the right thing for ourselves and the supplier; and when we do we are typically able to pass those price increases through to our customers. And the goal there being to maintain our cell margin per unit. So I think it’s while generally in the past I would say it’s been true that in a inflating market you tend to see your dollar margin per unit increase. I’m not sure if that’s it’s definitely not always the case. We’re going to have to see where this goes going forward and what we’re able to do based on the items that go up in supply and different things. But it’s — when your costs go up the key is can you pass through on your sell side of equal at least an equal dollar amount. Sometimes you can pass through a little bit higher dollar amount and you have lower margin rates with higher margin dollars and sometimes you can’t. So it’s really about understanding the market, understanding reimbursement, understanding the other pieces of the market to make those decisions. So right now, like I said we haven’t seen anything material. We’re keeping our eye on it. So it’s a little hard to predict at this point in time what we would expect. We don’t really have anything to build into our guidance at this time that was assuming price increases and increased margins necessarily related to the coronavirus.
Delta Airlines (JPMorgan Aviation, Transportation and Industrials Conference – 3/10)
As the situation has evolved, our first priority has been protecting the health and the safety of our customers and our employees. Our team has significantly increased resources to insuring our aircraft and facilities are clean and exceed our already high safety standards. While our year had gotten off to a strong start, in fact being ahead of plan for the first two months. Two weeks ago, our revenue trajectory changed dramatically as the virus spread meaningfully outside of Asia. Since then, we have seen a 25% to 30% decline in net bookings and are prepared for it to get worse. We expect demand erosion will continue in the near term and a built-up plan that prioritizes free cash flow generation and preserves liquidity.
Besides the safety of our employees and customers, our overarching goal during this time is cash preservation. We are targeting a minimum $5 billion in liquidity, being free cash flow positive and maintaining our investment grade balance sheet. And we’re taking a number of actions to address the financial impact.
First, the biggest lever that we have is capacity. We are actioning system capacity reductions of at least 15% down versus our plan. We are taking international down 20% to 25% and domestic down 10% to 15%. Importantly, we’re prepared to do more as the situation evolves. Second, we’re implementing cost reduction initiatives and are taking out $1.8 billion of expense versus our plan. This includes capacity related expenses as well as incremental cost initiatives that include a hiring freeze, offering voluntary leave options and lowering maintenance expense by temporarily grounding aircraft.
We have also had the benefit of approximately $2 billion of lower fuel expenses. Jet fuel prices have dropped significantly since the start of this year. Finally, we’ve also undertaken $3 billion of cash flow and liquidity-enhancing initiatives including CapEx deferrals, delaying voluntary pension contributions and suspending share repurchases. By taking these actions now, we can mitigate the impact going forward.
Unfortunately, there’s little we can do to impact the March quarter which we currently expect will see a mid to high-single digit decline in unit revenues for the quarter. We are also withdrawing our full-year guidance until we have more clarity on the duration and severity of the current situation…
Thanks, Ed. With customer demand impacted by virus-related fear of travel and corporates implementing a significant travel restriction, we’ve seen load factors under pressure. For the first seven days of March, domestic load factor was 77%. With bookings softness and increased cancellation rates, we expect our March full month domestic load factor will be closer to 65% to 70%. This would be down roughly 20 points over last year but people are still flying.
To better serve our customers during this uncertain time, we have extended our broad-based change fee waiver for existing bookings for travel through April 30 as well as all new bookings made in March and matter the travel period and are remaining flexible as the situation evolves.
But with these types of load factor declines, we must rationalize our capacity to adjust to the new level of demand. In the near term, we are reducing system capacity by at least 15 points versus what we previously scheduled. This reflects a 20% to 25% reduction in international flying with the 00:07:39 production in the Pacific. Our Pacific franchise is now down by 65% including full suspension of flying to China and significant reduction in both Japan and Korea.
The trans-Atlantic will be reduced by 15% to 20% The transatlantic will be reduced by 15% to 20% with the biggest production to Italy. Suspension of JFK Tel Aviv and cuts to leisure markets which are expected to see weakness throughout the summer. While Latin has been the least affected so far, we are monitoring closely and trimming weak demand flights.
Finally, domestic is where we have the most uncertainty as booking trends have worsened materially over the past week. We are currently targeting a 10% to 15% reduction in planned capacity. Domestic capacity reductions are primarily accomplished in high frequency markets and through the removal of utilization flying. Initially, when the outbreak was limited to Asia, we redeployed widebody aircraft to uneffected regions. But with recent deployments – with recent developments, we are parking both widebody and narrowbody aircraft and are evaluating early retirements of older, less efficient airplanes. Importantly, we continue to have significant flexibility on capacity allowing us to react quickly as trends change and they are changing quickly.
Honeywell International Inc (JPMorgan Aviation, Transportation, and Industrials Conference – 3/10)
We did also talk about the planning assumptions that underpin the guidance, including among other things our expectation that there’d be minimal economic impact from China and the global economy from the coronavirus as well as, the assumption that the macroeconomic environment as we exited the fourth quarter, would remain pretty you know consistent throughout 2020. Those last two things, obviously are being challenged, real time and the corona situation and its implications are changing day-by-day as frankly evidenced even by, what’s happening real time even now in places like Italy. Despite all that and based on our best possible forecast despite all that and based on our best possible forecasts as we see things today, we are reaffirming our original guidance for the first quarter. You know keep in mind our quarters tend to be back-end loaded in general with about 50% of our sales happening in the third month of every quarter. And with some of the challenges that have been going on this year that’s probably even a bit more true than usual. That does make things a bit more difficult to call, which means among our guided metrics, organic sales growth will likely experience the most pressure when all is said and done, but we do know how to execute in environments like this, and we’re going to continue to operate the company for the long-term for value creation, we do think this is a transitory impact at this stage…
At this stage, we’re expecting the coronavirus to be short-term disruption as I mentioned, but that really does continue to evolve daily, in fact I just got out of our morning call probably 30 minutes ago with our team to understand what the effects of that are real-time.
United Airlines (8K – 3/10)
United Airlines, Inc. (“United”), a wholly-owned subsidiary of United Airlines Holdings, Inc. (“UAL”, and together with United, the “Company”) has continued to experience a material decline in demand for both international and domestic travel, as well as an increase in trip cancellations, resulting from the spread of coronavirus (“COVID-19”). As such, the Company has taken proactive steps to mitigate the financial and operational impact to the business.
As a result of the decline in demand resulting from COVID-19, in addition to the capacity reductions on the Company’s trans-Pacific routes announced last month, the Company has also announced that it has pulled down 10% of its domestic schedules and 20% of its international schedules in April. The Company also anticipates making reductions in May of at least 20% and plans to proactively evaluate and cancel flights on a rolling 90-day basis until it sees signs of a recovery in demand. The Company’s capacity reductions have been focused on, but not limited to, reducing frequencies in markets with the ability to re-accommodate passengers on other frequencies or through other hubs, destinations in level 3 or level 4 travel advisory regions and surrounding areas and routes performing significantly below the system average.
As such, the Company is responding to this changing environment by adjusting its capital expenditures, operating expenditures and liquidity position. With respect to capital expenditures, the Company has postponed projects deemed non-critical to the operation. Therefore, the Company currently expects adjusted capital expenditures1 for full year 2020 to be approximately $4.5 billion. The Company’s capital expenditures were front loaded in 2020, and as such, the Company has spent approximately $2 billion year-to-date. The Company also suspended share buybacks under its existing share repurchase program on Monday, February 24, 2020 after the virus outbreak expanded to Italy.
American Airlines (8K – 3/10)
In particular, the consequences of the coronavirus outbreak to economic conditions and the travel industry in general and the financial position and operating results of our company in particular have been material, are changing rapidly, and cannot be predicted.
Centene Corp (Barclays Virtual Healthcare Conference – 3/10)
We’re reaching out to the various constituencies. I think as we said last week we feel like we’re well-positioned for a situation like this given the local approach that our Centene has always had to managing it’s populations in the markets we participate in. So, I would say again prefacing it by saying it’s still early. We haven’t seen a change from the comments we made last week on the March 4 call where we did the 2020 guidance.
And we – I just throw a couple of the other data points out there that we highlighted last week on this topic are greater than 8% of the cases that have been out there so far on Coronavirus are mild and as far as populations go the, the older one seem to be the more vulnerable at Centene which includes WellCare. We’ve got 94% of our combined population patient membership population 94% younger than 70 years of age and 45% is less than 20 given our big participation number one market share and Medicaid especially the TANF and the CHIP populations.
Delta Airlines (8K – 3/10)
“In the weeks since COVID-19 emerged, Delta people have risen to the challenge, taking every possible action to take care of and protect our customers during a stressful time,” said Delta CEO Ed Bastian. “As the virus has spread, we have seen a decline in demand across all entities, and we are taking decisive action to also protect Delta’s financial position. As a result, we have made the difficult, but necessary decision to immediately reduce capacity and are implementing cost reductions and cash flow initiatives across the organization.”
To align capacity with expected demand, Delta is reducing system capacity by 15 points versus its plan, with international capacity reduced by 20-25 percent, and domestic capacity reduced by 10-15 percent. The company will continue to make adjustments to planned capacity as demand trends change.
Freeport-McMoran Inc (8K – 3/10)
“Despite market volatility and potential economic impacts of the Coronavirus and turmoil in the global oil market, our team remains focused on execution of our plans to enhance performance at low copper prices and provide opportunities for superior performance as market conditions improve. Copper is an essential element of the global economy and its fundamental long-term outlook remains favorable.”
FCX also announced that there have been no significant disruptions to its supply chain or product shipments since the outbreak of the Coronavirus.
Qantas Airlines (IR Circulars – 3/9)
Announcing the changes, Qantas Group CEO Alan Joyce, said: “In the past fortnight we’ve seen a sharp drop in bookings on our international network as the global coronavirus spread continues.
“We expect lower demand to continue for the next several months, so rather than taking a piecemeal approach we’re cutting capacity out to mid-September. This improves our ability to reduce costs as well as giving more certainty to the market, customers and our people.
Akamai Technologies (3/9 – Deutsche Bank Media, Internet & Telecom Conference)
But I’m pleased to say, within the last 1.5 years, we’ve kicked in some initiatives that would allow us to find some new logos around the globe, and that continues to add in some booking strength in terms of growth. So I would say, in the near term, you’re going to continue to see the security solutions that we offer is kind of the main driver of growth. You have some new products, like page integrity that come out later this year, that should be, hopefully, very, very successful and probably pretty easy to roll into the quota-bearing reps sort of bag.
And then you have some longer-term sort of opportunities around identity cloud or customer identity as well as what the coronavirus is, working from home, our enterprise solutions would be a very logical selection for companies as they continue to reach a remote audience with cloud-based applications. And so we have like a much more dynamic, improved, secure gateway product that rolls out later this year. And so I’m pretty excited about some of the opportunities in the enterprise security space, which my belief is that the addressable markets in that sort of dwarf the security space that we’re in today.
Bookings.com (8K – 3/9)
Glenn D. Fogel, President and Chief Executive Officer of Booking Holdings, said, “As we explained when we provided first quarter 2020 guidance during our fourth quarter earnings announcement on February 26, 2020, the circumstances of the COVID-19 outbreak are changing rapidly and our guidance was based on the information we had at the time. As the situation has worsened and the negative impact on travel demand has increased since we provided guidance, in particular more broadly across Europe and in North America, we have decided to withdraw that guidance. Given the rapidly evolving situation, we are unable at this time to reliably quantify the impact of the COVID-19 outbreak on our future financial results. We plan to provide more information during our first quarter earnings call based on the information we have available at that time.”
Mr. Fogel continued, “While the full impact and duration of the COVID-19 outbreak is unknown at this time, we have been through travel disruptions in the past and expect that this disruption will ultimately be temporary. We believe the company has a strong operating model and solid balance sheet, which will enable us to weather this disruption. We remain confident in our long-term prospects and strategy, and we will continue to manage the company in a measured way to build value for the long term. In the meantime, we will continue to monitor the situation and support our customers, partners and employees during this difficult time. Our thoughts remain with the people impacted by this outbreak.”
Host Hotels (8K – 3/9)
Host Hotels & Resorts, Inc. (NYSE: HST), the nation’s largest lodging real estate investment trust (the “Company”), today announced it is withdrawing its full-year 2020 guidance due to the ongoing financial impact of reduced travel demand as a result of the global coronavirus (COVID-19) outbreak.
Vail Resorts (8K – 3/9)
Regarding the Company’s outlook, Katz said, “Given the uncertainty surrounding the impact of the coronavirus on the broader U.S. travel market and any specific impact to the performance of our Company, we are not issuing guidance at this time for fiscal 2020 and are withdrawing our previous guidance issued on January 17, 2020. In the week ended March 8, 2020, we saw a marked negative change in performance from the prior week, with destination skier visits modestly below expectations. We expect this trend to continue and potentially worsen in upcoming weeks.”
Interpublic (Deutsche Bank Media, Internet & Telecom Conference – 3/9)
Now, you’re correct that when we put together that number, the coronavirus was sort of in its early stages, we didn’t have a handle on what impact that’s going to be, but we were conservative in the number that we put out there for a number of reasons. One, if you look at us historically, we have a tendency to beat the numbers that we put out as guidance as we did on organic, our guidance was 2% to 3% in 2019 and we came in at 3.3%. And the year before, we beat even more with respect to the guidance.
So, we’re fairly conservative in the numbers we put out there because we understand that our analysts, such as yourself, use this for modeling purposes and we do build in some conservatism in these numbers, both with respect to the organic growth as well as the margin numbers that we put out there.
That said, the issue of the coronavirus has obviously changed dramatically since we did that. But I did want to put out there that we do have some conservatism in the forecast that we did and it’s based on a bottoms-up numbers. It doesn’t go top down. Some companies take last year’s performance and just provide a factor of increase over that. That’s not the way we do it. We start with zero and we have our agencies build up what their numbers will look like.
Varian Medical Systems Inc – Conference Call – March 9th
Today, we announced that the COVID-19 outbreak will negatively impact our operating results.
Across the company’s Asia Pacific geographies, health care resources are being prioritized for the treatment and management of the outbreak. Consequently, we are experiencing delays in hardware and software installations and acceptance as well as in delivery of interventional oncology procedures. While no orders have been canceled, we expect revenues to be negatively impacted. And as of today, estimate second quarter of fiscal 2020 revenues to be in the range of $800 million to $825 million. While uncertainty remains around the duration, severity and geographic scope of the COVID-19 outbreak, we preliminarily estimate 7% to 9% revenue growth for fiscal year 2020.
Yes, Matt, specifically, there were 7 provinces in China that were hit quite hard with coronavirus. And as part of that, as Dow noted, with cancer treatments being inpatient in the country, the hospital beds were allocated to coronavirus patients and that really drove the focus away from radiation oncology, and so we had some delays in installs, acceptances, et cetera. We see those continuing forward as things get back to normal. We’ve seen progression in 6 of the 7 provinces in that direction. And just to echo what Dow noted about the market as a whole, our NPS in China has been 84%…
Answer – Dow R. Wilson: Net — that’s Net Promoter Score.
Answer – Christopher A. Toth: Net Promoter Score has been 84%. And during this time, our system uptime has continued to be very high as well as we’ve been able to continue to provide service. So the net result from our customer base has been continued positive feedback. So feeling really good about market perception, and we’re seeing progression to come back to some level of normalcy over the next 45, 60 days…
So in China, it’s really just been the access issue and the focus within the hospitals on providing care. As Dow shared earlier, in China, cancer care is inpatient. So the focus has been on coronavirus. As we are getting back to some level of normalcy, that will just installs and acceptance will follow. We have not been seeing, in other areas, a deprioritization with respect to wanting to proceed forward, just some efforts and timing related to some of the intake of new patients and hospitals getting their policies together for handling the virus.
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