In the next 48 hours, six companies will report second quarter earnings. While it won’t be pretty, you have to think long term.
Earnings season is here, and I am afraid it will not be very pretty. Unfortunately, it has not been pretty for a while, but we can always hope. Six companies will be reporting second quarter earnings over the next 48 hours.
Everyone is trying to put as good a face on it as they can, especially since we all know that at some point in the future, it will get better. The questions are when, which sectors will start improving first, and how much better will it get?
The thing I have a hard time reconciling is that there is still plenty of equity capital out there. Nominal interest rates are still at historic lows, even though spreads have widened and loan percentages have declined. Demand for seniors housing of some type, maybe every type, will grow this decade, unless COVID takes a much nastier turn than anyone expects.
From an investment market perspective, what will break the logjam will be those owners, or investors, or lenders, who will have to sell. Debt payments won’t be made and lease coverages will be negative. Not for everyone, but enough. This will contribute to the great pricing re-set that I started talking about two years ago that no one wanted to think about, or believe would happen. But it will make for a healthier industry in the long term, whether you believe it or not.
What we all have to remember is that this remains a great industry, and it provides a service that will be needed for years to come. It will also change. We just have to figure out a way to get over this current hump, as large as it may appear to be right now. So, when you listen to these earnings calls, put them in perspective. The lights are not out in seniors housing, like they are on Broadway, and restaurants and bars, and hotels. And they never will be.