Social Media - Whether you hate it or use it daily - it can tell us a lot about the companies we are watching now.
No one would argue that social media outlets do not have their flaws. That said, they do provide a compelling snapshot of how varying segments of society feel or think regarding a particular topic. At Creekmur Wealth we use this snapshot to help provide an indication of how a company may perform during a period of extreme uncertainty and what this means for the overall economy. Let's take a look at some companies that are reporting earnings this week and what social media may indicate about their future direction. 21. Whirlpool (WHR)
Whirlpool reports their Second Quarter numbers on Wednesday. They are a massive supplier of various home appliances. The price tag on many of these items is quite high in relation to the normal spending of a household. Growing or decreasing sales of these items provides a glimpse into the financial resources households in America currently possess. Analysts expect Whirlpool’s Second Quarter sales in North America to decrease to $2.3 Billion v. $3 Billion in the Second Quarter of 2019.
Where things get very interesting is comparing analysts’ expectations vs. Consumer Purchase Intent on Social Media for Whirlpool. As of July 21st, Whirlpool’s Purchase Intent is +103% so far this year and is +20% in the second quarter versus the first quarter. This data leads us to believe that there is growing demand for Whirlpool products for a variety of reason – growing consumer savings balances to spend, necessity due to spending more time at home, etc.
Whirlpool reporting better than expected sales or providing a brighter sales outlook for later in the year would provide indication that the economy in general is strengthening. Weaker sales than currently anticipated would show us that much of the chatter on Social Media is purely desire based and is not attainable as consumers allocated funds towards basic necessities (food, fuel, clothing, etc.)2. Dollar General (DG)
While Whirlpool gives us an indication of whether consumers have excess funds to allocate towards big ticket items, Dollar General will give us an indication if consumers are seeing their personal incomes recover to a level that allows them to shop at differing stores. Dollar General has seen strong sales growth in 2018, 2019, and the first quarter of 2020. This trend is expected to continue for the second quarter of 2020.
It will be critical to watch whether sales continue to grow at their current pace or began to stagnate. Stagnating sales growth (at Dollar General) would provide an indication that consumers have more funds to spend at other locations, thus their overall income and financial health is solidifying, all in all a positive sign for where our economy is currently. On the flip side, if sales growth continues at it’s previous pace or even accelerates this would provide an indication that the consumer is uncertain about their future income and concerned about the economy in general.
Consumer Purchase Intent Mentions for Dollar General are currently +29% so far in 2020. However, Purchase Intent for the second quarter is -37% vs. the first quarter of 2020. This data would lead us to believe that more individuals returning to work and the government providing enhanced unemployment benefits has enabled consumers to allocate funds at higher priced stores.
There is a strong possibility that household incomes are elevated for a limited time. With the current enhanced unemployment benefits expiring in the coming days and unemployment still hovering north of 10% there is a large risk of household incomes falling in the coming months. All told, Dollar General’s upcoming report will help provide a clearer indication of how the consumer is handling the current economic and employment uncertainty.
3. Airline Companies (DAL, LUV, UAL, AAL, etc.)
Seven major airlines are reporting their numbers for the second quarter during this week. It will be critical to listen to executive commentaries on the future of travel, whether the airlines may require additional fiscal support from the government, the number of jobs being lost via furloughs or forced retirements, and if there was a notable increase in travel during the second quarter.
During Delta’s Second Quarter earnings report last week they indicated that their revenue was down as much as 90% at the peak of COVID-19 shutdowns. Additionally, Delta (along with other major airlines) provided a clear indication that they will be looking to cut costs aggressively as the recent re-opening bump in travel has begun to stagnate.1
Purchase intent for all major airlines is down significantly both year over year and quarter over quarter. There is a clear indication from this data that it will take an extended period for travelers to feel comfortable flying at pre-COVID 19 levels. For example:
- LUV 2020 Purchase Intent is -60% v. 2019 Purchase Intent
- UAL 2020 Purchase Intent is -67% v. 2019 Purchase Intent
- DAL 2020 Purchase Intent is -60% v. 2019 Purchase Intent
- AAL 2020 Purchase Intent is -57% v. 2019 Purchase Intent
So, What is The Impact To You?
Regardless of what happens during the upcoming earnings season, we can see that the federal government’s various forms of stimulus have provided enough fiscal support to ensure the U.S. economy does not completely fall off a cliff during mandated shutdowns. In our current situation, the government will need to quickly hash out another stimulus package to further bridge the economic gap. There will be long lasting impacts from these shutdowns that will potentially take years to rectify regardless of what happens on the stimulus front in the coming weeks.
Clearly, the way in which consumers act and allocate their finances has been impacted by the response to COVID-19. The above social media action and additional data makes clear that no matter what happens in the coming months with a COVID-19 vaccine, there is a new status quo on a number of fronts for consumers and we must continue to learn to adapt to it on the personal level and as investors.
If you have further questions about how the current political and economic effects your financial plan and investments give us a call. There is never a wrong time to touch base and get a firmer grip on your financial future!
Creekmur Wealth Advisors may be reached at 866-358-4441 or Info@Creekmurwealth.com.