No surprises here: Companies offering munchies, technology-based solutions big winners so far during COVID-19 pandemic
These days, many of us are relying on information technology aids to help us do our jobs and asking for food deliveries to cure our munchies.
Companies in those types of businesses — GrubHub, Domino’s and Papa John’s posted impressive earnings gains for the second quarter of 2020.
Other companies like Oklahoma-based ONE Gas and OGE Energy are holding their own.
Retailers and those in the recreational leisure sector? Not so much.
A report released recently on companies that are part of the S&P 400 Midcap Index by Embark backs up those observations.
“It’s not all doom and gloom,” the report concluded.
• Grubhub, an online and mobile food-ordering and delivery marketplace, reported second-quarter 2020 revenues of $459 million, up 41% year-over-year and gross food sales of $2.3 billion, up 59%, year-over-year.
"Our singular focus for the second quarter was to support our restaurant partners as much as possible in their time of need. With a little help from increased demand, we are proud to announce we were able to spend approximately $100 million supporting and keeping restaurants, drivers and diners safe during these difficult times," said Matt Maloney, Grubhub’s founder and CEO.
• Domino’s was another company that benefited from increased consumer demands during the pandemic, with second quarter 2020 net income of $118.7 million, compared to $92.4 million the year before.
“Our focus as a global brand and the commitment of our local operators remains steadfast on serving our customers and our communities with a convenient, affordable and safe food and service experience,” said Ritch Allison, Domino’s CEO.
• Papa John’s posted a net income of $26.9 million for the second quarter of 2020, compared with about $8.4 million the year before.
“Our strong momentum has enabled us to hire over 20,000 new restaurant team members during the second quarter and target hiring another 10,000 positions in the third, helping support those impacted by unprecedented levels of unemployment,” said CEO Rob Lynch. “These efforts position Papa John’s solidly to continue meeting the needs of our customers who face continued challenges from COVID-19, and to drive long-term sustainable loyalty to our brand long after the current pandemic.”
• Dillard’s reported a net loss for a 26 week period that ended Aug. 1 of $170.5 million, compared to a net income of $37.9 million for the same time frame in 2019.
• Marriott Vacations Worldwide posted a net loss of $70 million in the second quarter of 2020, compared to a net income of $49 million the same time a year ago.
• WPX Energy, a Tulsa-based energy company, posted a net loss of $414 million on revenues of $33 million for the quarter, compared to a net income of $305 million on revenues of $695 million the year before. Hedging-related losses related to oil and natural gas pricing heavily impacted its results. The company announced Monday it would be merging with Oklahoma City-based Devon Energy.
• Chesapeake Energy, based in Oklahoma City, entered into a bankruptcy earlier this year after posting a net loss of more than $8 billion in the first quarter.
Holding their own
• ONE Gas, which supplies natural gas to more than 2 million residential and commercial customers across Kansas, Oklahoma and Texas, earned a net income of $25.3 million during the second quarter of 2020 compared to $24.5 million the same quarter in 2019.
• OGE Energy, which supplies electricity through Oklahoma Gas and Electric Co. to about 858,000 customers in Oklahoma and Arkansas, posted second-quarter 2020 net earnings of $85.9 million on revenues of $503.5 million.
In the second quarter of 2019, the company had posted net earnings of $100.2 million, or 50 cents per share, on total revenues of $513.7 million.
A broader look
The S&P MidCap 400 Index is a stock market index provided through S&P Dow Jones Indices.
Generally, financiers use the index to measure the success of the United States’ mid-cap equities sector, which includes stocks for companies with total market capitalizations that range from $2.4 billion to $8.2 billion when they joined the index.
As of Jan. 31, the median market capitalization for member companies was $4.26 billion, with the largest at nearly $13.3 billion and the smallest at about $1 billion.
The index, launched in 1991, covers nearly 7% of the total U.S. stock market.
Companies that are part of the index operate across a broad range of economic sectors that include consumer discretionary and staples spending, energy, financial, healthcare, industrials, information technology, real estate and utilities.
Embark looked at year-over-year second-quarter revenues, net incomes, impairments, cost reductions, debt restructuring, earnings guidance, risk factors and whether or not they had notified investors they were a going concern.
If found that 24% of the companies reported significant revenue increases during the second quarter.
Recent acquisitions played a role in boosting revenue jumps for some companies. Alternatively, disposals and divestitures pushed revenues lower for others.
Other second quarter findings:
• More than two thirds of sampled companies reported severe or moderate net income declines.
• Half of the sampled companies reported making cost-cutting moves.
• 40% of the sampled companies restructured or took on additional debt.
• Nearly all sampled companies included COVID-19 related risk statements in the financial reporting.
• Most sampled companies didn't issue future guidance after withdrawing estimates issued during the first quarter of the year.
“The lesson to walk away with: there’s something driving most of the outliers, good or bad,” the report states.
“There is a lot going on in today’s marketplace,” said David McGuire, Embark's strategic accounts practices leader. “One of our major takeaways is that what is happening can be specific to certain industries. Clearly, energy companies whose successes are tied to oil prices aren’t doing as well, year-over-year.
"But companies that have relevance to the new normal — information technology, quick service restaurants and health care businesses — are seeing increased volumes in activity and reported much better than anticipated results for the second quarter.”
Robert Dauffenbach, director of the Center for Economic and Management Research at the University of Oklahoma's Price College of Business, said Embark’s data paints a picture of dire circumstances for most publicly traded companies that are part of the S&P MidCap 400 Index.
“When you see these numbers, everything is just so topsy-turvy — unprecedented in our lifetime. But I think we definitely will someday come through this. The big questions are when, and, how much damage we will have to go through before we get back to a freely functioning, fully open economy,” Dauffenbach said.