One word has been rattling many major U.S. companies this week – “coronavirus”. News of the outbreak spreading beyond China’s borders has many people concerned, including company heads who are concerned about how the epidemic will affect earnings.
According to CNBC, 27 various S&P Composite 1500 companies were concerned enough to reference the virus on earnings calls this past week.
In particular, Apple, McDonald’s, and Starbucks executives were verbal about the potential impact that the coronavirus may have on business.
Thus far, the virus, which originated from the Wuhan district in Central China, has thousands of confirmed cases. Worldwide, the unofficial number stands at 9,800. Six of those are in the U.S. with 121 cases still pending test results from labs. More than 200 people in China have died from the virus. The numbers are rapidly evolving and sometimes disputed. Many believe those affected are even higher than reported. The virus also continues to spread beyond China’s borders including within the countries of Australia, India, Japan, Canada, as well the U.S. Many other countries have suspected cases that have not been confirmed as of yet.
As governments issue travel bans, many investors are shying away from stocks with a heavy Chinese consumer base. However, as the information on the virus evolves, larger U.S. businesses are taking note amid the uncertainty of the virus.
Apple, for instance, reported much higher than expected earnings on Tuesday. But, the maker of the iPhone issued a wider range of guidance for the next quarter. Tim Cook, Apple’s CEO, said the change was due to the unpredictable nature of the coronavirus.
Cook said: “We’ve currently closed one of our retail stores and a number of channel partners have also closed their storefronts. Many of the stores that remain open have also reduced operating hours. We’re taking additional precautions and frequently deep cleaning our stores as well as conducting temperature checks for employees. While our sales within the Wuhan area itself are small, retail traffic has also been impacted outside of this area cross the country in the last few days.”
Apple acknowledged that the company is working with its Wuhan suppliers to mitigate any loss of production.
Starbucks is also taking precautions. The largest coffee chain in the world has already closed more than half of its Chinese Starbucks locations. The company said that sales are slow at the remaining locations that are open within China. The news sent Starbucks stock down this week. The company said the long duration of the store closures will greatly affect its impact on business, but that it’s too early to change the company’s earnings guidance.
Meanwhile, McDonald’s has its own concern about the virus, citing its reservations during its earnings call this past week. The restaurant has closed all restaurants in the Hubei province, totaling several hundred in all.
Chris Kempczinski, McDonald’s CEO, expressed concern but left room for optimism. “Just to put it in perspective, when you think about China, it does represent about 9 percent of our global restaurant count but it’s about 4 percent to 5 percent of system-wide sales, and it’s only about 3 percent of income. And so while, again, China is a critical market for us and we’re very concerned about the situation over there, its actual impact on our business is going to be fairly small, assuming, again, that it stays contained in China,” Kempczinski said.
While some companies are showing concern for the impact the virus will have on earnings, one stands to actually see increased earnings. 3M, the maker of disposable face masks, plans to up its production. Currently, the company is focusing on manufacturing more masks to meet the increased and projected demands.