Delta variant is hitting Corporate America

The stock market continues to ignore worsening headlines on the COVID-19 Delta variant front and climb to fresh records. 

But given a shift in tone lately from corporate America, perhaps investors should be on high alert. Companies that had been bullish on the economic recovery from the depths of the pandemic are becoming increasingly cautious as the variant spreads.

Here are three household names that have recently warned of a financial impact from the COVID-19 Delta variant. Investors may be ignoring the commentary below, but it could prove to be an earnings headwind in the current quarter — one that isn’t priced into stock prices. 

Disney

While Disney generally impressed investors with its most recent earnings — notably by reaching 116 million subscribers for its streaming service Disney+ — the COVID-19 Delta variant lurks as a potential profit headwind in coming quarters.

Disney (DIS) says it’s seeing a pickup in cancellations for visits to its parks. 

“In terms of impact of the Delta variant, we see strong demand for our parks continuing. And the primary noise that we’re seeing right now are really around group or convention cancellations. In other words, large groups that are coming in relatively short term. But, on the whole, we see really strong demand for our parks. In fact, our park reservations now are above our Q3 attendance levels. And as you just saw with our earnings announcement, our Q3 attendance levels were pretty darn good. So, we’re still bullish about our park business going forward,” Disney CEO Bob Chapek told analysts on an earnings call Thursday evening.

Airbnb

Similar to Disney, Airbnb had a solid second quarter as travel resumed following people getting their COVID-19 vaccine. The company’s second quarter sales surged 299% to $1.3 billion from a year ago. Adjusted operating profits clocked in at $217 million, much improved from a $59 million operating loss. 

Despite the rebound, Airbnb (ABNB) CFO David Stephenson warned that the COVID-19 Delta variant is beginning to take a toll. 

“So as we exit Q2 and come into Q3, we have a combination of fewer bookings for the fall, just given the nature of some of the seasonality and any kind of impact potentially on COVID concerns going into early Q3.So we’re not seeing a substantial deceleration.”

Airbnb baked this caution into its third quarter outlook — it sees bookings down compared to the second quarter and versus the third quarter of 2019.

Southwest 

As Yahoo Finance’s Myles Udland writes in the Morning Brief newsletter, Southwest dropped a surprise onto the heads of investors this week with a Delta variant warning of its own. 

“The company has recently experienced a deceleration in close-in bookings and an increase in close-in trip cancellations in August 2021, which are believed to be driven by the recent rise in COVID-19 cases associated with the Delta variant. Based on the assumption that COVID-19 cases remain elevated in the near-term and current revenue trends in August continue into September, the Company’s current outlook for third quarter 2021 operating revenues has worsened by an estimated three to four points from its previous outlook three weeks ago, compared with third quarter 2019,” Southwest warned in a new SEC filing. 

Southwest expects third quarter operating revenue to drop 15% to 20%.

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