Corona is causing the number of result warnings to skyrocket

In 2020, German companies had to warn of unexpectedly poor results almost six times as often as they did ten years ago. Four corporations have even reduced their forecasts several times. But the consequences were not so serious for everyone.

The conciliatory end of an exciting share year: The DAX price table on the last trading day in 2020.

JEvery year on the stock market has many surprises in store. However, the financial markets are seldom as turbulent as last year. With the outbreak of the corona pandemic, the Dax lost up to 40 percent of its value in the face of the sudden great economic worries in March and, with the budding hopes, recovered surprisingly quickly by more than 60 percent over the course of the year. In the 2020 annual balance sheet, the index even rose by 4 percent. Since the beginning of the year, the Dax has now increased by a further 11 percent. The sudden increase in the volatility measure V-Dax-New to a good 93 a year ago is a reflection of this uncertainty. The last time it was around 85 during the financial crisis in October 2008, it is currently 18.

The fact is: even for experienced managers from long-established companies, statements about business development are generally associated with many imponderables. This is all the more true in such an environment. It is therefore hardly surprising that many German companies unexpectedly had to revise their own profit and sales forecasts downwards in the previous year when the outlook deteriorated so suddenly and severely – especially since quite a few outlooks were drawn up before the crisis and its extent became apparent .

Media and car companies particularly affected

This had consequences: In the quality segment of the German stock exchanges, the “Prime Standard”, warnings were issued 210 times in 2020 against surprisingly lower than forecast earnings or sales – a record within ten years and an increase of around a quarter compared to 2019. Around 85 Percent of the warnings were made with reference to Corona. For comparison: in 2011 warnings were issued 36 times. The situation was particularly drastic in the first half of the year when the number of warnings more than tripled to 160 compared to 2019. A total of 25 warnings came from the Dax, a new high. In the previous year it was 11. Four Dax companies have now issued several warnings. There were also highs in the S-Dax and the rest of the Prime Standard, only the M-Dax held up slightly better than in the worst year 2019, with 32 after 33 reports.

These are the results of an analysis by EY that are exclusively available to the FAZ. The auditing and consulting company has been investigating the publication-obligatory corrections to the profit and sales forecasts of the companies listed in the Prime Standard (currently 305) since 2011. The good news: In the second half of the year, these corporations issued warnings only 50 times, which is as often as in the previous year. In addition, the number of unexpected forecast increases climbed to a high.

In view of the better than expected economic development in the second half of the year, the tide also turned in the course of the year for profit and sales forecasts, says EY. The number of reports in which companies announced that they would exceed their original targets for earnings or sales rose from 63 in the first half of the year to 104 in the second half – the highest half-year figure since 2011. For the year as a whole, the forecast increases fell by a total of 167 a good third higher than in 2019.