What Apple, Walmart and other U.S. companies are saying about the coronavirus outbreak

COVID-19, the disease caused by the new coronavirus that was first identified late last year in Wuhan, China, is becoming a dominant theme in the earnings releases and conference calls of S&P 500 companies as investors press for answers on how it will impact their financials.

A FactSet search of the 364 earnings call that were held in the period stretching from Jan. 1 through Feb. 13 found 38% included the term “coronavirus” at least once. The industrial, IT and health-care sectors accounted for the highest number of companies discussing the topic, according to FactSet.

While many were asked to quantify the negative impact on their businesses, 34% said it was too early to say and did not include the virus in their financial guidance. As a result, “it is possible that there will be an increase in the number of companies issuing negative guidance later in the first quarter as these companies gain clarity on the impact,” FactSet senior earnings analyst John Butters wrote in written commentary.

This is what companies have been saying:

• Apple Inc.AAPL, -2.53%is not expecting to meet second-quarter financial guidance because production has slowed or been halted in China due to the COVID-19 outbreak. “Work is starting to resume around the country, but we are experiencing a slower return to normal conditions than we had anticipated,” the company said in a statement on Monday. Apple generates about 15% of its revenue from China, and many of its products are manufactured there.

Read also: Apple’s coronavirus warning wasn’t a total surprise, but magnitude rattles Wall Street

• Boston Scientific Corp.BSX, -1.13% , which has a $600 million business in China, is expecting a “negative first-half impact” on expectations that Chinese patients will push back elective medical procedures during the outbreak. The company lowered its quarterly sales guidance for the first quarter of 2020. The device maker now anticipates a “preliminary negative sales impact estimate of $10 million to $40 million.”

• Capri Holdings Ltd.CPRI, -2.66% , which owns luxury brands Jimmy Choo and Versace, said it now expects annual revenue of $5.65 billion and adjusted earnings per share of $4.45 to $4.50 as the virus eats into sales. That’s below the FactSet consensus for revenue of $5.78 billion and per-share earnings of $4.87.

Read also: How much will COVID-19 hurt the U.S. economy? It’s anyone’s guess right now

• Carnival Corp.CCL, +0.13%said there could be a fiscal 2020 earnings-per-share impact of 55 cents to 65 cents if all operations are suspended in Asia through the end of April. If that comes to pass, according to Carnival, there would be a material impact on the business from suspended cruises in Chinese ports; cancellations in other parts of Asia; and the impact on bookings, which is determined by the length of time that an event influences travel.

• Coca-Cola Co.KO, -0.52%CEO James Quincey said the outbreak of severe acute respiratory syndrome (SARS) in 2003 and 2004 was less of a concern than this coronavirus. The Chinese market makes up 10% of Coca-Cola’s global volume. “China’s economy was in a different place when SARS happened,” he said. “It’s worth noting that China’s economy is [now] much bigger, and this could become more connected to the rest of the world.”

• The Estée Lauder Cos.EL, -1.28%said the third quarter will be most impacted by the sales decline of luxury beauty products in China. The company updated its sales outlook for the second half of the year, saying it now predicts an increase of up to 1%, compared with the same period a year ago.

• Expedia Group Inc.EXPE, -0.68%is expecting a $30 million to $40 million impact on adjusted EBITDA in the first quarter as a result of the outbreak. It also expects “some impact beyond [the first quarter] in 2020 as well,” CEO Barry Diller told investors. “But the exact amount will depend on how long it takes for travel trends to normalize.”

• General Mills Inc.GIS, +0.00%said half of its Häagen-Dazs shops in greater China are closed, and the shops that remain open have “severely restricted hours.” Greater China makes up 4% of General Mills’ net sales, 40% of its sales in the region are at Häagen-Dazs shops and other restaurants. The company told investors it can’t yet share how the closures will affect its numbers for fiscal 2020.

• Gilead Sciences Inc.GILD, -0.87%is working with Chinese authorities to test its investigational antiviral remdesivir as a treatment for people with the new coronavirus. The drug maker plans to conduct a randomized, controlled trial in China as part of those plans, saying that remdesivir has shown “in vitro and in vivo activity in animal models against the viral pathogens” Middle East respiratory syndrome (MERS) and SARS, both of which are also coronaviruses.

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• Hasbro Inc.HAS, -1.18%continues “to have office and third-party factory closures” in China as a result of the outbreak. The company said that China is responsible for about two-thirds of its global sourcing. “The biggest unknown right now is how quickly the manufacturing factories can get their production ramp back up,” said Hasbro CFO Deborah Thomas. “Travel is limited, [and] places are still closed.”

• Hilton Worldwide Holdings Inc.HLT, -0.88%said about 150 hotels, totaling approximately 33,000 rooms, are closed in China as a result of the coronavirus outbreak.

• HSBC Holdings PLCHSBC, -5.61%expects a weaker first-half performance in 2020, due to the downturn in Hong Kong and virus-related credit losses in the first quarter, it said. “The most extreme downside scenario in there I would say makes an assumption that the coronavirus is still continuing in the second half of this year,” an executive said on an earnings call. “If you look at that and that was to become the central scenario, there would be about $600 million of additional loan losses provisions required.”

• InterContinental Hotels Group PLCIHG, +2.24%said 160 hotels are closed in China or closed to new guests. The company’s fee business is expected to take a $5 million hit in February in China, as a result of the outbreak. Its Chinese operations make up less than 10% of group operating profit. CEO Keith Barr told investors that the postponement and cancellation of conferences will have an impact on its operations, too. “What I saw during H1N1 and other times in China, the key thing to remember is the Chinese government’s ability to stimulate economic growth and activity is unlike any other country,” he said, on an earnings call.

• IQVIA Inc.IQV, +0.03% , which runs clinical trials, including in China, said it expects a $25 million impact in the first quarter as a result of the outbreak. “The patients who are enrolled in a trial are simply not going to visit the hospitals where all the sites are in China because that’s kind of the more dangerous spot right now,” CEO Ari Bousbib told investors.

• Nike Inc.NKE, -1.50%said that it has closed about half its stores in China, while the remaining stores are reporting lower-than-expected retail traffic. The athletic-apparel maker said it plans to provide an update about the impact of the virus on its third-quarter earnings call.

• PVH Corp.PVH, -3.61% , owner of the Calvin Klein and Tommy Hilfiger brands, said that 20% of its global sourcing comes from greater China, which also made up 7% of its 2019 revenue. Most PVH-owned stores in China remain closed. Still, the company reaffirmed its adjusted earnings-per-share guidance of $1.79 for the fourth quarter and at least $9.45 for the full year.

• Ralph Lauren Corp.RL, -0.53%said fiscal 2020 sales could be hurt by up to $70 million and operating income in Asia could take a $35 million to $45 million hit as a result of the outbreak. Two-thirds of the luxury retailer’s mainland China stores have been closed for a week, and about half of its stores were closed another week.

• Royal Caribbean Cruises Ltd.RCL, -2.07%canceled 18 cruises in Southeast Asia and modified several itineraries as a result of the virus. The cruise-line operator said it expects an impact of 65 cents per share on its 2020 financial performance. If it has to cancel cruises in Asia through April, doing so would impact the company’s 2020 financial performance by an additional 55 cents a share.

• TripAdvisor Inc.TRIP, -2.73%said it may see a low-single-digit percentage impact on its financial results. “We do see some unexpected or new cancellation levels in Asia, but we’re not that exposed to Asia as an overall part of our business,” CEO Stephen Kaufer told analysts.

• Tyson Foods Inc.TSN, -0.39%has restarted some operations in China, but CEO Noel White said the company will face short-term impacts from the outbreak, even if the fallout eventually helps support government efforts in China to “decrease” the number of wet markets. Researchers believe that the virus, common to bats, may have been transmitted to humans via another animal sold at the Huanan Seafood Wholesale Market, a wet market in Wuhan. “We’ll continue to see modern grocery continue to grow in China,” White said. “The combination of [African swine fever] and coronavirus would expedite that transition.”

• Under Armour Inc.UA, -1.94%expects to lose between $50 million and $60 million in sales to the coronavirus outbreak.

• VF Corp.VFC, -0.87% , which owns the sneaker brand Vans, has closed 60% of its owned and partner stores in China. The shops that have remained open are reporting “significant” declines in retail traffic.

• Visa Inc.V, +0.44%said it’s too early to tell how the outbreak will impact the company. “If planes are not flying in and out of China, if hotels are not being filled, which they’re not at the moment, and if the supply chains are being impacted, which I suspect they are, there’s going to be some impact,” a Visa executive said at an investor day. “It’s just going to depend on how long this goes on.”

• Walt Disney Co.DIS, -0.81%said if its shuttered Shanghai and Hong Kong theme parks remain closed for months, it would shave $175 million off operating income in the current quarter. Disney’s movie-studio business could also take a hit, as cinemas are closed in China and Disney is preparing to launch the live-action “Mulan” reboot in March.

• Yum China Holdings Inc.YUMC, -0.31% , which operates fast-food brands including KFC and Pizza Hut, has closed 30% of its restaurants. For those that are still open, same-store sales have declined up to 50% since the Lunar New Year. The outbreak is causing “significant interruption,” said Yum China Holdings CEO Joey Wat. Pizza Hut sales have struggled more than those of KFC, which has a stronger delivery business, as more Chinese customers are opting for takeout at home, the company said.

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Apple’s coronavirus warning wasn’t a total surprise, but magnitude rattles Wall Street

Apple Inc. realized Wall Street’s worst fears with a Presidents Day holiday warning on Monday that it won’t be able to meet second-quarter financial guidance due to the coronavirus in China.

“Work is starting to resume around the country, but we are experiencing a slower return to normal conditions than we had anticipated,” Apple AAPL, +0.02% said in a statement. About 15% of Apple’s revenue derives from China and many of its products including the iPhone are manufactured there.

The company’s announcement triggered global stock losses, the tech-heavy Nasdaq-100 futures NQ00, -0.67% slid 0.7%, and Apple shares fell over 3% in premarket trading.

As for analysts, long-term bulls were not throwing in the towel. “While trying to gauge the impact of the iPhone miss and potential bounce back in the June quarter will be front and center for the Street, we remain bullish on Apple for the longer term 5G supercycle thesis despite today’s news,” said Wedbush analysts Daniel Ives and Strecker Backe, in a note to clients.

They are sticking to an outperform view, with a $400 price target. Apple shares closed at $324 on Friday.

Apple stock has climbed around 11% so far this year, but has underperformed other big technology names, such as Microsoft Corp. MSFT, +0.89%, which is up 17%. Wall Street remains worried that Foxconn, which manufactures iPhones for Apple is struggling to resume production.

On Monday, the American Chamber of Commerce in Shanghai warned that a survey of some members showed U.S. manufacturers in the region are struggling from a lack of workers.

“While we have discussed a negative iPhone impact from the coronavirus over the past few weeks, the magnitude of this impact to miss its revenue guidance midway through February is clearly worse than feared,” said the Wedbush analysts, who expect a “knee-jerk” negative reaction for shares later Tuesday.

Still, while a “tough pill to swallow for the bulls,” the analysts “believe this is a more of a timing issue rather than an extended supply/demand issue for iPhones globally and does not change our longer term bullish thesis on the name.”

Samik Chatterjee and a team of analysts at J.P. Morgan said Tuesday that owing to “continuing challenges stemming from the coronavirus outbreak on both domestic demand and global supply,” they are now expecting much lower fiscal second-quarter iPhone volumes and a more modest reduction in those volumes for the third quarter, led by the iPhone 11.

“We see downside risks to consensus expectations for the smartphone industry and 5G smartphone volumes in 2020, led by the lower volume outlook for China,” said Chatterjee. But the analysts said the impact on 5G iPhones may be less due to the fact North America accounts for around 40% of iPhone volume shipments and Apple’s declining iPhone volume exposure to China.

The analysts are sticking to a overweight rating and a $350 price target.

“It is actually as clear as can be that this is a temporary, short-term issue, and we wouldn’t be surprised if it barely proves to be that,” said David Bahnsen, chief investment officer of The Bahnsen Group. “Yes, demand is down where there is a direct impact, but their productive capacity is not an issue, and delayed demand is hardly systemic with this company and this product.”

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Bankrupt Dean Foods deals assets to dairy-farming cooperative

The biggest U.S. dairy farming cooperative struck a $425 million deal to buy dozens of plants from bankrupt milk processor Dean Foods Co., in a deal executives said would preserve jobs and markets for farmers’ milk.

The deal, which was proposed by Dairy Farmers of America, requires approval of the bankruptcy court and the U.S. Department of Justice.

If consummated, it would see the Kansas City, Kan., agricultural cooperative take over the bulk of Dean’s plants, following the top U.S. milk company’s bankruptcy filing in November.

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Dean’sDFODQ, +2.29%bankruptcy followed a yearslong decline in sales of fluid milk, the Dallas company’s main business. Bottled water, fruit juices and plant-based milk alternatives have crowded out milk cartons in grocery store beverage cases, pressuring the milk business. Dean also struggled as grocery sellers like Walmart Inc.WMT, +0.38%and Kroger Co.KR, -1.40%opened their own milk-bottling plants, expanding sales of store-brand milk that is often priced far below branded milk from processors like Dean.

Pressures are mounting on the U.S. milk sector beyond Dean. Borden Dairy Co., another Texas dairy company, filed for bankruptcy in January, also blaming falling milk consumption and retailers’ investment in bargain-priced milk. Battling low prices, thousands of dairy farmers have closed their milking parlors in recent years, according to the U.S. Department of Agriculture.

An expanded version of this report appears at WSJ.com.

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Game over for HQ Trivia, the once-viral app sensation

After a boom-and-bust three-year run, HQ Trivia now appears to be little more than fodder for a future trivia question.

The game-show app, which at its peak in early 2018 had more than 2 million daily users, officially shut down Friday. CNN Business obtained an email from CEO Rus Yusupov telling employees that “lead investors are no longer willing to fund the company, and so effective today, HQ will cease operations and move to dissolution.” Yusupov added that a banker had been hired to find new investors, and a sale had been proposed but fallen through.

All 25 employees were laid off, and the game signed off with a profane, drunken finale on Friday.

“Someone hire me!” co-host Anna Roisman said at one point during the show. “I’m f**king talented!”

On Saturday, former host Scott Rogowsky — known as “Quiz Daddy” to HQ Trivia players and long the public face of the app — ripped the company’s management. “HQ didn’t die of natural causes,” he said in a tweet. “It was poisoned with a lethal cocktail of incompetence, arrogance, short-sightedness & sociopathic delusion.” He did not elaborate.

Rogowsky left the company last April, reportedly after a disagreement with management.

HQ Trivia launched in October 2017, offering cash prizes for live daily trivia contests, and quickly became a viral sensation. But user numbers fell sharply as the game’s novelty wore off and copycats abounded, and the company fell into turmoil: Co-founder Colin Kroll died of an accidental drug overdose in December 2018; last year Yusupov fended off an internal mutiny from employees, who said he was mismanaging the company; and 20% of the staff was laid off in June 2019 amid a slump in downloads.

The company last raised $15 million in 2018, according to Axios, at a valuation of $100 million.

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Canopy’s stock roars higher after better-than-expected earnings, sparks broad rally in cannabis sector

Canopy Growth stock roared higher Friday and sparked a broad rally among cannabis stocks, after a better-than-expected earnings report bolstered sentiment on the beaten-down sector.

The report is a “beacon of hope” for the sector, said MKM analyst Bill Kirk.

Canopy shares CGC, +13.37%WEED, +15.84% rocketed 18% in morning trading, putting them on track for their biggest gain in 18 months, after the company posted a narrower-than-expected fiscal third-quarter loss and revenue that rose above forecasts, amid strength in business-to-consumer sales. The company reported a net loss of C$124.2 million ($93.8 million), or 35 cents a share, after net income of C$74.9 million, or a loss of 38 cents on a per-share basis. That beat the FactSet consensus for a loss of 52 cents a share.

Net revenue rose 49% to C$123.76 million ($93.46 million), above the FactSet consensus of C$105.0 million. Recreational business-to-business cannabis sales fell 11% to C$53.5 million, as a 42% increase in dry cannabis sales was offset by an 86% drop in oil and softgels.

Recreational business-to-consumer cannabis sales increased 32% to C$15.2 million, as dry cannabis sales grew 24% and oil and softgels jumped 183%. Canadian medical cannabis sales fell 7% to C$14.8 million and international medical sales rose nearly sevenfold (up 593%) to C$18.7 million.

“We had expected only small improvements from the prior quarter, but Canopy is showing a meaningful progression,” Kirk wrote in a note to clients.

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Still, the company’s path to profitability remains unclear and Kirk is waiting for the earnings call for details on Cannabis 2.0, the second phase of Canadian legalization that allows derivatives, including edibles and beverages.

“We doubt early 2.0 sales will be a significant contributor given the lack of activity observed at production facilities two weeks before 2.0 legalization,” he wrote. “We continue to rate WEED shares neutral.”

On the company’s earnings call with analysts, new Chief Executive David Klein said he has started a full review of the company’s footprint to help define a path to profitability. The executive, who came to Canopy from its biggest shareholder Constellation Brands Inc.STZ, +1.31% , said the company will take the first steps to right-size the business in the next 90 days.

“[W]e need to align our resources and investments with the size and growth rate of the market as it exists today,” Klein said, according to a FactSet transcript.

Aurora Cannabis shares ACB, +7.48%ACB, +5.10% rose 5%, a day after the company reported a more than C$1 billion quarterly loss. That news was widely expected, however, after Aurora unveiled a major overhaul of its management and operations last week. The company’s new interim Chief Executive Michael Singer is now tasked with turning the company around, instilling a culture of discipline and driving it to profitability, said Ladenburg Thalmann analyst Glenn Matson.

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“We continue to view the near-term revenue challenge as an industry problem that will correct itself in the next few quarters,” Matson wrote in a note. The analyst continues to rate the stock a buy, although he lowered his price target to $3 from $4.

“Now that Aurora has right sized its business, we think concerns about the solvency of the company should subside. While it may take the remainder of F20 (June) for investors to regain confidence in the company, we expect that this will occur over time,” he wrote.

Other Canadian licensed producers were swept up in the positive wave, with Tilray TLRY, +7.81% up 8%, Cronos CRON, +6.84%CRON, +6.25% gaining 7% and OrganiGram OGI, +13.33% up 9%. Aphria APHA, +3.61%APHA, +4.01% gained 6% and Hexo HEXO, +19.69%HEXO, +19.05% was up 3%.

CannTrust Holdings Inc.’s stockCTST, +4.32%TRST, +1.40% rose 8%, after it said it plans to submit documents to regulators that detail how it has fixed the issues at its Niagara, Ontario facility and in support of the reinstatement of its license there. The company said that it plans to finish efforts to fix a second site at Vaughan, Ontario in the second quarter of 2020. CannTrust was growing pot illegally at the Niagara facility, and the Vaughan facility was not compliant with standards, regulators have alleged.

U.S. cannabis stocks also got a boost after Cantor Fitzgerald initiated coverage of 10 U.S. multistate operators (MSOs), saying they are attractively valued with solid fundamentals.

“The current regulatory environment in key large U.S. “restricted” states (in terms of limited licenses granted) provides a unique opportunity for U.S. MSOs to build out assets with a limited pool of competitors and be in a position of strength (scale, financial) when full legalization comes,” analyst Pablo Zuanic wrote in a note to clients. “The boom and bust seen in Canadian stocks has, unwarrantedly, dragged down U.S. MSOs also and masked strong underlying growth trends.”

Zuanic initiated coverage of Cresco Labs Inc. CRLBF, +5.55%CL, +5.45% and Trulieve Cannabis Corp. TCNNF, +4.10% with overweight ratings, assigned neutral ratings to Acreage Holdings Inc. ACRGF, +10.10%, AYR Strategies Inc. AYRSF, +5.18%, Curaleaf Holdings Inc. CURLF, +4.11%CURA, +3.59% , Green Thumb Industries Inc. GTBIF, +1.91%, Harvest Health & Recreation Inc. HRVSF, +4.80% , HARV, +5.30% iAnthus Capital Holdings Inc. ITHUF, +2.46% and MedMen Enterprises Inc. MMNFF, +1.72%, and rated Green Growth Brands Inc. GGBXF, +20.67% at underweight.

Trulieve has “best-in-class financials, 50% share in Florida (one of the fastest-growing med markets in the U.S.), superior execution (it outsells Curaleaf by 5 times in Florida with 1.5 times more stores) and seeks to grow in other states,” the analyst wrote. “On fundamentals, we like both Cresco Labs and Green Thumb (neutral), but think the former offers, for a lower valuation, a more attractive state mix, more depth over breadth (so IL and PA do not get diluted), and higher margins.”

The ETFMG Alternative Harvest ETF MJ, +3.72% was up 5%, with 14 of its 25 components trading higher. The Horizons Marijuana Life Sciences ETF HMMJ, +5.85% was up 7%, with 45 of its 54 components gaining.

The S&P 500 SPX, +0.18% was flat and the Dow Jones Industrial Average DJIA, -0.09% was down 0.1%.

Cannabis Watch: For all of MarketWatch’s coverage of cannabis companies: Click here

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