If you thought the massive losses from S&P 500 companies were behind us, you're in for a surprise. Some whoppers are still coming.
Nine S&P 500 companies, including industrials like American Airlines, consumer discretionary play Carnival and communications services company Walt Disney, are on the verge of losing $700 million, or more, just in the third quarter. This is based on an Investor's Business Daily analysis of analyst data from S&P Global Market Intelligence and MarketSmith. It's based on accounting rules including all charges and gains.
Now that the third quarter is wrapped up, investors are gearing up for another harrowing period of reported losses. Stay-at-home orders during the Covid-19 shutdown are causing many companies to bleed money. These expected losses even make the $555 million Exxon Mobil is expected to lose in the quarter look tame — although some analysts think Exxon's loss could be worse.
S&P 500: Big Losses Aren't Over Yet
"The estimated earnings decline for third quarter of 2020 for the S&P 500 is 21.2%," said John Butters, earnings analyst at Factset. "If 21.2% is the actual decline for the quarter, it will mark the second largest year-over-year decline in earnings reported by the index since the second quarter of 2009 (when it was down 26.9%)." The third quarter's expected profit drop is only marginally better than the 31% decline in profit in the second quarter.
The economy is arguably more open than it was in the second quarter. But Corporate America is far from being back in business.
And the sectors reveal where most of the pain could be. Profit in the S&P 500's energy sector is expected to drop by 100%, as it slips into the loss territory. Marathon Petroleum is seen losing more than any other company in the sector: $647 million in the third quarter.
But that pales next to some losses that analysts say are coming.
American Airlines: The Biggest Loser
Analysts think S&P 500 firm American Airlines will lose $2.5 billion during the third quarter. That's the largest loss of any company in the S&P 500. And it's even more than the $2.1 billion the company lost in the second quarter following accounting rules.
Certainly, it's no surprise for investors paying attention. The stock's IBD Composite Rating is a rock-bottom low of 10, meaning its stock and profits are underperforming 90% of companies. This reflects the stock's 57% collapse this year. American is expected to report on Oct. 21. Do you know what to look at if you're thinking about buying American Airlines' stock?
American Airlines' loss is giant even among companies in a beleaguered industry. Four of the nine S&P 500 companies looking at the biggest losses in the third quarter are airlines. Delta, for instance, is expected to lose $2.2 billion followed by United Airlines, seen losing $1.8 billion.
Profit in the industrials sector is expected to plunge more than 60% in the third quarter.
Losses At Travel Companies Take Off
Following the airlines, the travel and leisure industries' losses coming in the third quarter are off the charts, analysts say.
S&P 500 company Carnival, one of the world's largest cruise ship operators, is seen losing $1.7 billion in the third quarter. That's an improvement from the $4.4 billion it lost in the second quarter. But it still ranks fourth among the S&P 500 in terms of the biggest expected loss. Carnival reports on Oct. 3.
Investors keep trying to jump onboard the sinking stock, looking for a bargain. But with a Composite Rating of just 21, this isn't a leader. Shares lost nearly 71% of their value this year. Make sure you're looking at the right indicators when thinking about buying the stock.
And then there's Walt Disney. The entertainment empire is expected to lose $1.6 billion during the third quarter. Again, that's better than the $4.7 billion it lost in the second quarter. Losses of that size, though, are only sustainable so long. The S&P 500 company this week announced it was laying off tens of thousands of employees. The stock, down 15% this year, continues to be one that many long-term investors are looking at. Disney reports on Nov. 8.
Could analysts be overly pessimistic in their forecasts for the quarter? Absolutely. But do you really want to find out, when you can invest in leaders, instead?
S&P 500 Losses: Look Out Below!
Largest losses expected in the third quarter of 2020
| Company | Symbol | Expected Q3 2020 Loss ($ Millions)* | Stock YTD % Ch. | Sector | Composite Rating |
|---|---|---|---|---|---|
| American Airlines | -$2,456.3 | -56.2% | Industrials | 10 | |
| Delta Air Lines | -2,172.3 | -46.8% | Industrials | 20 | |
| United Airlines | -1,815.6 | -60.1% | Industrials | 19 | |
| Carnival | -1,717.6 | -70.4% | Consumer Discretionary | 21 | |
| Walt Disney | -1,585.2 | -14.7% | Communication Services | 45 | |
| Southwest Airlines | -1,323.6 | -29.7% | Industrials | 29 | |
| Royal Caribbean | -1,070.1 | -50.9% | Consumer Discretionary | 54 | |
| Boeing | -908.1 | -48.5% | Industrials | 15 | |
| General Electric | -735.6 | -44.1% | Industrials | 6 |
Source: IBD, S&P Global Market Intelligence, * - based on calendar third-quarter results using GAAP accounting
Follow Matt Krantz on Twitter @mattkrantz
