The stock market was little changed Friday morning, with the Dow Jones Industrial Average (DJINDICES:^DJI) up 0.13% at 10:50 a.m. EDT. The U.S. House of Representatives passed a second round of pandemic aid late Thursday, but that was widely expected.
While some U.S. states may begin easing social distancing in the coming weeks, the coronavirus continues to spread. The U.S. now has more than 869,000 cases and over 50,000 deaths, according to Johns Hopkins University.
While the broader market struggled to find direction, shares of Intel (NASDAQ:INTC) and American Express (NYSE:AXP) headed lower. Intel reported blockbuster results but provided weak guidance, while American Express took a massive charge to account for expected credit losses.
Intel's strong quarter is overshadowed by weak guidance
The pandemic threw many businesses into turmoil during the first quarter, but Intel benefited on two fronts. First, the surge in people working from home drove increased sales of laptops. Second, data center customers appear to have ramped up spending on Intel's pricey server chips in an effort to build out capacity.
Intel reported total revenue of $19.8 billion for the first quarter, up 23% year over year and nearly $1.2 billion ahead of the average analyst estimate. Revenue from the PC-centric segment jumped 14% to $9.8 billion, while revenue from the data center group soared 43% to $7 billion. Laptop platform volumes were up 22% from the prior-year period, while data-center platform volumes rose 27%.
Adjusted earnings per share came in at $1.45, up 63% year over year and $0.18 higher than analysts were expecting. That's impressive growth, but Intel expects things to slow down in the second quarter. The company guided for second-quarter revenue of $18.5 billion and adjusted EPS of $1.10, up 12% and 4%, respectively. That EPS guidance was below the $1.17 analysts were expecting.
For the full year, all bets are off. Intel pulled its guidance for 2020 due to the immense uncertainty surrounding the pandemic. While sales have been strong so far, demand for PCs will almost certainly drop as consumers struggle financially during a recession. Data center demand could weaken as well. The cloud computing giants, which buy plenty of Intel's server chips, may slow spending if their customers start having trouble paying their bills.
The market wasn't interested in Intel's strong first-quarter results. Instead, weak second-quarter guidance and the lack of full-year guidance sent the stock down 2.3% in the morning.
American Express prepares for credit losses
American Express joined a long list of lenders taking massive provisions for credit losses when it reported its first-quarter results on Friday morning. The company booked a $2.6 billion charge in anticipation of future losses, driven by significant reserve builds.
Total revenue was down 1% to $10.31 billion, while earnings per share crashed 77% to $0.41 due to the charges. American Express reported that its EPS would have been $1.98 if not for the reserve builds. Revenue was $360 million lower than the average analyst estimate, while EPS missed by $1.12.
"In light of the current environment, we are aggressively reducing costs across the enterprise, while at the same time selectively investing in initiatives that are key to our long-term growth strategy," CEO Stephen Squeri said. While the company is working to cut costs, it has committed itself to no pandemic-related layoffs for the remainder of 2020.
American Express stock was down around 0.6% in the morning. Shares are now 40% below their 52-week high.