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Not all Doom and Gloom for S&P 400 Midcap

4 min read

Publicly traded companies worked hard earlier this year to reorient their operations to adapt to new realities created by COVID-19.

A report released recently by Embark evaluates how companies that are part of the S&P MidCap 400 Index (including some headquartered in Oklahoma) have handled increased levels of risk and uncertainties posed by the global pandemic as people adapt to the crisis by changing how they work, shop, dine and more.

The report, which provides a good spot check on how the nation’s economy is handling those issues, summarizes its findings this way: “It’s not all doom and gloom.”

But that depends on what kind of business a company does.

Why S&P MidCap 400 Index matters

The S&P MidCap 400 Index is a stock market index provided through S&P Dow Jones Indices.

Generally, financierws use the index to measure the success of the United States’ mid-cap equities sector, which includes stocks for companies with total market capitalizations that ranged from $2.4 billion to $8.2 billion when they joined the index.

As of Jan. 31, the median market capitalization for member companies was $4.26 billion, with the largest at nearly $13.3 billion and the smallest at about $1 billion.

The index, launched in 1991, covers nearly 7% of the total U.S. stock market.

Companies that are part of the index operate across a broad range of economic sectors that include consumer discretionary and staples spending, energy, financial, healthcare, industrials, information technology, real estate and utilities.

Oklahoma companies that belonged to the index at the start of the year included WPX Energy, ONE Gas and Chesapeake Energy.

“There is a lot going on in today’s marketplace,” said David McGuire, Embark's strategic accounts practices leader. “One of our major takeaways is that what is happening can be specific to certain industries. Clearly, energy companies whose successes are tied to oil prices aren’t doing as well, year-over-year."But companies that have relevance to the new normal — information technology, quick service restaurants and health care businesses — are seeing increased volumes in activity and reported much better than anticipated results for the second quarter.”

What Embark’s analysis found

Embark, a company that provides businesses with financial services, analyzed sample companies representing the 400 companies included in the index and looked at year-over-year second-quarter revenues, net incomes, impairments, cost reductions, debt restructuring, earnings guidance, risk factors and whether or not they had notified investors they were a going concern.

If found that 24% of the companies reported significant revenue increases during the second quarter.

Recent acquisitions played a role in boosting revenue jumps for some companies. Alternatively, disposals and divestitures pushed revenues lower for others.

Other second quarter findings:

• More than two thirds of sampled companies reported severe or moderate net income declines.

• Half of the sampled companies reported making cost-cutting moves.

• 40% of the sampled companies restructured or took on additional debt.

• Nearly all sampled companies included COVID-19 related risk statements in the financial reporting.

• Most sampled companies didn't issue...

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