EARNINGS IN THE TIME OF COVID-19

The COVID-19 pandemic and ensuing economic impact have created intense volatility in the financial markets and turned what was a strong bull market into a potential recession.

 

In these fast moving and uncertain times, publicly traded companies now face the daunting task of how best to communicate with their constituents in situations where they themselves may not yet have all the answers.

With the next quarterly earnings cycle fast approaching, communications and investor relations professionals have a unique responsibility to provide a clear assessment of the COVID-19 impact, while also conveying long-term confidence and resilience.

When it comes to communications strategies for quarterly earnings, there is no one size fits all approach, but there are certain steps communications teams should consider. Below are five areas we suggest IR and comms teams think about as they begin to prepare for their next earnings announcement.

 

Earnings in the Time of COVID-19

I. Start Early

While we always recommend that companies begin preparing for earnings at least a month out from their announcement date, it is of even greater importance to do so during a time of uncertainly and crisis.

More than ever, companies need to provide a unified and consistent message to the market, making early and coordinated discussions amongst all internal and external comm teams vital.  Regular engagement will ensure ample time for all parties to understand the situation on the ground and consider the necessary approach to messaging given the fluid nature of the COVID-19 situation.

 

II. Closely Monitor Peer Earnings and Related Communications 

In an era where information changes almost hourly, it is imperative that IR teams are keeping close tabs on what their peers are saying and how they are speaking to the market.

No management team wants to be caught communicating something that feels tone deaf to what their peers or the broader industry is saying or doing.  Keeping a live peer tracker updated in real time (or at a minimum, twice daily) will help to keep tabs on peer activity and messaging and serve as an effective “gut check’ when considering your own communications with the Street.

 

III. Be Transparent

In times of uncertainty, offering a clear, well thought out message on the challenges faced by the Company, whether specific to operations, supply chain or overall market dynamics, is highly valued by investors.

In acknowledging challenges head-on and being frank and forthcoming about the obstacles ahead, management teams convey a strong understanding of the situation and shed a positive light on their leadership abilities in navigating difficult circumstances.

 

IV. Reinforce Long-Term Business Fundamentals

All companies should be using earnings as a time to reinforce the strengths of your organization and the key fundamentals that will help position it for growth in the long term.

While a management team may feel inclined to focus on the short-term response to COVID-19, there is significant value in refreshing messaging tied to how the underlying business will support an eventual recovery and deliver long term shareholder value.

 

V. Provide Thoughtful Updates to Guidance

A company’s forward-looking guidance can act as an effective way to educate the market on the near-term pressures a business is facing.

In the current environment, companies can expect little or no pushback from investors should they decide to withdraw or adjust quarterly and/or annual guidance.

If a company has previously disclosed guidance and anticipates a significant impact on its operations, issuing an intra-quarter guidance update or even pre-announcing should be considered. To ensure full transparency, updates can be packaged in a business or operational update, via call or release. The announcement should directly address the impact of COVID-19, mitigation efforts, balance sheet considerations, and any other pertinent details relevant to the business.

For those companies considering the issuance of new guidance, they should be realistic when communicating their outlook with investors and frame all messaging in the context of COVID-19. They should also be open to acknowledging the continued uncertainty and fluid nature of the crisis.

 

In short, in times of uncertainty, companies need to be ever vigilant in how they approach communications with stakeholders. While companies have little control over how the COVID-19 virus will spread, they can control how they communicate with the market. By preparing early and delivering clear and consistent messaging, companies can enhance credibility and foster lasting trust.

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