Impact of COVID-19 on analysts’ expectations

Impact of COVID-19 on analysts’ expectations

At the start of the pandemic, there was still much talk of a possible technical recession coupled with a rapid economic recovery after about two quarters. Since then, the assessment of the economic situation has significantly deteriorated, and comparisons are being made with the oil crisis in 1975 or even with the Great Depression in the 1930s.


The impact of COVID-19 varies from one industry to the next. Differences are evident not only in terms of the current intensity of the crisis, but also in terms of the expected duration and possible progress of the recovery phase. In this context, we can distinguish between the following three main scenarios:

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This now begs the question as to which scenario can be expected for which industries. To answer this question, we have examined analyst forecasts for more than 90,000 listed companies in more detail since the beginning of the year. The following chart shows the industry median of the forecast adjustments to the expected earnings per share (EPS) for 2020, 2021 and 2022:

Median change in EPS forecasts since early 2020


Source: Analysis: IFBC, data: Bloomberg (27 April 2020).


Our analyses show the different impact COVID-19 is expected to have on the various sectors. For example, for the “fossils” sector analysts expect a 46% lower EPS on average for 2020 compared to their estimate at the beginning of the year. On the other hand, in line with expectations, EPS estimates for companies in the “pharmaceutical & biotech” sector were corrected the least.


The expected course of the crisis is also clearly reflected in the adjustments made to EPS estimates. For example, data for the “travel & entertainment”, “transportation” or “professional services” industries shows that analysts are currently predicting a relatively rapid recovery (V – scenario) in these sectors. Assuming an average reduction in profit forecasts for 2020 of 42%, the deviation from analyst forecasts for the “travel & entertainment” sector decreases, somewhat surprisingly, to 23% for 2021 compared to the forecast before COVID-19. This can be attributed, on the one hand, to the planned or already approved government support measures, for example in the airline industry. On the other hand, the anticipated recovery comes with the hope that the restrictions on meetings and travel can be relaxed or even lifted once a vaccine is available.


A longer recovery period is expected in the “industrial services” or “financial institution” segments (U – scenario). However, these examples also show that the medium-term losses are assessed differently for the various industries. In the “industrial services” sector, earnings per share were forecast to decrease by more than 10% in 2022 and in the “financial institutions” sector, the profit level for 2022 is expected to be around 7% lower compared to the forecast prior to the COVID-19 outbreak.


For the “automotive” or “aerospace & defence” sectors, analysts forecast no significant recovery potential until the end of 2022 (L – scenario) due to lack of demand. For the “fossils” sector, a slight recovery is forecast for the next few years. However, given a 37% reduction in the EPS forecast in 2022, the mid-term forecasts were still very much revised downwards.


The changes in the EPS forecasts presented above since the outbreak of COVID-19 remain very uncertain given that the actual course of the pandemic is still very difficult to predict. In addition, the adjustments to analyst forecasts for companies within a sector can vary significantly due to specific business models.


In the coming weeks and months, it will be necessary both to tackle the crisis assertively and to prepare a successful way out of it. In the context of the financial management of a company, the following key points must be taken into account:


  • Increasing the resilience of the business model
  • Implementing rolling forecasts to increase visibility
  • Planning for different scenarios to allow for all eventualities
  • Establishing a sustainable financing concept
  • Investing in promising development projects
  • Seizing opportunities that may arise from the crisis, for example by making appropriate acquisitions.