With the majority of earnings reports already released over the past three weeks, the picture emerging is that corporate America has been weathering the COVID-19 pandemic quite well.
The percentage of companies reporting actual EPS that came in better than estimates has been 83%, which is above the five-year average, according to FactSet. If 83% is the final percentage for the quarter, it will mark the highest percentage of S&P 500 companies reporting a positive EPS surprise since FactSet began tracking this metric in 2008.
Some macro indicators are also supporting these positive undercurrents. There was a strong rebound in job creation for the month of July and a low rate of inflation—two crucial factors to keep the Federal Reserve on the sidelines for an extended period of time.
Amid all these positive developments, there remain a few high-profile corporate names still to release Q2 earnings. We're watching these three stocks which might react after their earning releases:
1. Berkshire Hathaway
Warren Buffett's holding company Berkshire Hathaway (NYSE:BRKa), (NYSE:BRKb) released its Q2 earnings on Saturday. The report showed that the Omaha, Nebraska-based company's operating income declined 10% during the second quarter, dropping to $5.51 billion from $6.14 billion in the year-earlier period.
The company also took a charge of approximately $10 billion from Precision Castparts, Berkshire’s largest business within its manufacturing segment. But the main highlight of this latest report was that the investment firm, spent a record $5.1 billion in buying back Berkshire’s own stock during the period.
That came as Berkshire unloaded almost $13 billion of other companies’ shares, including airline stocks and some financials, in what was Buffett’s biggest selling quarter in more than a decade.
“Our operating business groups are preparing for reduced cash flows from reduced revenues and economic activity as a result of COVID-19,” Berkshire said Saturday in a regulatory filing.
“We currently believe our liquidity and capital strength, which is extremely strong, to be more than adequate.”
Berkshire’s investments in public markets rose $34.5 billion in the quarter, led by its stake in Apple (NASDAQ:AAPL). That gain caused overall second-quarter net earnings to surge to $26.3 billion, up from $14.1 billion a year ago.
Berkshire Class A and Class B shares plunged more than 19% in the first quarter and lagged the S&P 500 during the second quarter with declines of more than 1%. The Class B shares closed on Friday at $209.48.
2. Lyft
The San Francisco-based ride-hailing company, LYFT (NASDAQ:LYFT), is scheduled to release its Q2 report on Wednesday, August 12, after the market close. Forecasts call for a net loss of $1.07 a share on revenue of $340.26 million.
Lyft shares plunged about 7% on Friday to close at $30.19 after its biggest rival, Uber (NASDAQ:UBER) disappointed on earnings during its Thursday evening report.
Uber's release showed the ride-hailing business continues to struggle amid the COVID-19 pandemic.
Lyft, which—unlike globally-focused Uber—only operates in the US and Canada, began seeing signs of a slowdown in mid-March as governments issued guidance telling people to shelter-in-place and significantly curb travel. The situation worsened rapidly in Q2 as the virus spread and workers’ continued to operate from their homes.
Investors will be keen to know how LYFT's plan to cut costs is evolving in order to manage current losses. The company's shares are down 30% for the year.
3. Cisco Systems
Cisco Systems (NASDAQ:CSCO) will report its fiscal 2020, fourth quarter earnings on Wednesday as well, also after the market closes. The San Jose-based networking giant will likely report $0.74 a share profit on sales of $12.04 billion, according to analysts’ consensus forecast.
Revenues for its fiscal third quarter were down 8% year-over-year, for the company’s worst decline in six years, as Cisco's business took a hit from the global pandemic.
Under Chief Executive Officer, Chuck Robbins, Cisco has made a string of acquisitions in order to build its software and services businesses. Last year, Cisco agreed to acquire Acacia Communications (NASDAQ:ACIA) for about $2.6 billion, gaining chips and machines that help translate optical signals into electronic data.
These growth initiatives, coupled with the company’s dominant position in the Americas region, where it generates the majority of its sales, could help the tech conglomerate beat expectations. Its shares, which closed on Friday at $47.43, are little changed this year.