3M, Pfizer See Recovery in Sight With Economic Woes Near Peak

The coronavirus outbreak blindsided the world as it sent economies into a nosedive. Now, the bottom is starting to come into focus for several of the largest companies in the U.S.

Manufacturer3M Co. and drugmakerMerck & Co. see the pandemic impact peaking this quarter, paving the way for some semblance of a rebound later in the year. As Pfizer Inc. Chief Financial Officer Frank D’Amelio put it on a conference call Tuesday, “Punch line: second-half recovery.”

The comments offer aglimmer of hope that Corporate America is moving past the uncertainty that characterized the initial weeks of the coronavirus outbreak, even as many companies continue to pull their financial forecasts. While the pain isn’t over yet, investors are looking to bellwethers for clarity on what to expect as the economy begins to reopen across the U.S.

The S&P 500 has climbed 29% since hitting a pandemic nadir last month. It’s still well off its 2020 highs, but the steady recent gains underscore the subsiding anxiety in the markets.

22,412 in U.S.Most new cases today

-16% Change in MSCI World Index of global stocks since Wuhan lockdown, Jan. 23

-1.​124 Change in U.S. treasury bond yield since Wuhan lockdown, Jan. 23

-0.​5% Global GDP Tracker (annualized), March

3M, which makes sought-after respirator face masks in addition to an array of other products, said it’s currently expecting the second quarter to be the “weakest quarter in 2020 for global economic activity.” In China, where the outbreak began and where a resumption of business activity has begun in earnest, 3M is already seeing a “broad-based” recovery, according to Chief Executive Officer Mike Roman.

Improvement Ahead

“We’re seeing the economy start to show signs of recovery broadly,” he said on a conference call. “It’s not back to normal yet but improving as we move through April.”

PepsiCo Inc.’s results showed promising signs as well, as the beverage company indicated that sales gains weren’t just driven by stockpiling from panicky customers.Higher snacking and repeat purchases suggest a potential boon for big brands going forward, CFO Hugh Johnston said.

Albert Bourla, CEO of drugmaker Pfizer, told investors on an earnings call that the negative impact from Covid-19 will be more potent in the second quarter, though he expects a broader economic recovery in the second half of the year. Similarly, Merck said it’s planning for “a gradual return to normal operations beginning late in the second quarter and extending through the third quarter, with a full return to normal operations in the fourth quarter.”

Not every company is ready to call a bottom, though.Caterpillar Inc., the world’s biggest maker of mining and construction equipment, sees the second quarter as worse than the first, but executives aren’t certain how things will progress from there.

“Confidence is really important for our customers to be able to make sure they can buy machines in whatever segment they are, and that’s going to take a little while to recover,” CFO Andrew Bonfield said in a telephone interview. “We can’t be sure that’s just in the second quarter and everything goes back to normal in the third quarter.”

— With assistance by Riley Griffin, Joe Deaux, and Deena Shanker

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