Major US companies are warning about the potential impact of the coronavirus on earnings calls

  • The word “virus” or “coronavirus” was mentioned by 27 different companies on earnings calls this week, according to a CNBC screening using FactSet.
  • Executives at Apple, Starbucks and McDonald’s are all raising flags about the impact the coronavirus could have on business.

A deadly spreading virus is now worrying some of the world’s biggest companies.

The word “virus” or “coronavirus” was mentioned by 27 different S&P Composite 1500 companies on earnings calls this week, according to CNBC’s screening using FactSet.

The Wuhan virus has infected more than 6,100 people in China, topping the number of cases from 2003’s SARS virus. The coronavirus has killed more than 130 people and continues to spread throughout Asia and the U.S.

The virus is scaring Chinese citizens out of leaving their homes, pushing governments to consider or enact travel bans, and forcing investors away from stocks that rely on Chinese consumers. Now, the virus is worrying management at big U.S. businesses, including Apple, Starbucks and McDonald’s.

Despite Apple’s blowout earnings on Tuesday, Apple’s range of guidance for next quarter is wider than typical. CEO Tim Cook attributed this change to uncertainty caused by the deadly coronavirus, which has shut down travel in parts of China.

“We’ve currently closed one of our retail stores and a number of channel partners have also closed their store fronts. Many of the stores that remain open have also reduced operating hours,” said Cook. “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 said it is working with its suppliers in the Wuhan area to mitigate any production loss.

The world’s largest coffee chain Starbucks has closed more than half of its Chinese locations as the country battles the spread of the virus. Starbucks said the number of stores and the duration of closures are the two primary drivers of business impact. Executives said the Chinese locations that are still open have seen sales slow down, compared to historical numbers, sending the stock down more than 2% on Wednesday.

Starbucks CFO Patrick Grismer said the slower foot traffic in China as customers are hesitant to visit commercial centers is a big factor for the coffee company.

“We’ve taken action in our open stores to adjust operating hours. We’ve also gone in and adjusted some of the product offerings based on supply chain availability,” International, Channel Development and Global Coffee & Tea President John Culver said on the call. Starbucks said it was too early to change its earnings guidance.

McDonald’s management also called the Chinese virus “concerning” on its earnings call on Wednesday.

“We have closed all restaurants in the Hubei province, which is several hundred restaurants that have been closed,” McDonald’s CEO Chris Kempczinski said to investors on the call.

“Just to put it in perspective, when you think about China, it does represent about 9% of our global restaurant count but it’s about 4% to 5% of system-wide sales, and it’s only about 3% of [operating] 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 to China,” Kempczinski added.

Here are some of the other companies mentioning the virus on earnings calls this week.

3M

“3M is currently putting all its effort into organizing the manufacturing of face masks, and will do its best to maintain production during the Spring Festival.”

A.O. Smith

“At this time, our supply chain, we see no issues currently and going forward. we have a little caution on Q1 is because the Chinese New Year’s festival falls into January and any time – it was January 25th. Any time it falls into January what we see is more interruption in the appliance market and less traction.”

Crane & Co.

“As I think about this, the risk is not so much with our – from a materiality standpoint, it’s not so much with our existing facilities and dependencies. It’s more the broader supply chain. It’s going to be what happens in the Chinese supply chain all in and when I think about that some of the end segments that are a little more dependent than others would be Fluid Handling, Payment & Merchandising that – and that A&E very little and Engineered Materials nothing.”

United Technologies

“We actually went back and took a look at 2003 and the impact of the SARS virus, and as you’ll recall, air traffic slowed down significantly for about three months. And really there was about a six-month impact overall in the aftermarket. I would say there are two major differences today. One is the airlines are a hell of a lot healthier than they were in 2003. We were coming off of 9/11 and airline bankruptcies and no one had any money. The fact is, air traffic remains strong, but there will be a blip in Asia this quarter as a result of this.”

Whirlpool

“Obviously, when people don’t go into stores the market will decline. You all know that our exposure to the China domestic market is limited. … The main exposure is somewhat limited in particular with one factory where we export from Chinese almost a thousand miles away from Wuhan.”

PolyOne

“We don’t have any facilities in Wuhan directly, but we do have some associates there. So, we’ve taken measures to restrict travel for all of our associates into and out of China.”

Polaris

“We do source some parts [in China] and we don’t see a disruption from that. It’s really – the restrictions that they have are more on people moving not parts moving. So we feel good about our supply chain being able to continue to function smoothly.”

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