Energy Transfer is the latest midstream MLP to slash its distribution, announcing yesterday evening that it will chop its payout in half. Management will get to explain their rationale for the distribution cut when Energy Transfer reports earnings on November 4, but this action was necessary to address the firm's fragile balance sheet. As we discussed in July, Energy Transfer faced mounting pressure to reduce debt to protect its BBB- credit rating, which sits one notch above junk status. With oil and gas production declining, weak commodity prices hurting shale producers, and litigation threatening the Dakota Access Pipeline, Energy Transfer's credit metrics had potential to weaken.

Intel slumped more than 10% on October 23 after reporting third-quarter earnings results. Sales fell 4% year-over-year as consumers opted for cheaper laptops and companies and governments pulled back on datacenter spending. These unexpected COVID-driven headwinds tilted Intel's mix towards lower-priced products, causing gross margins to surprise on the downside as well. Many of these dynamics are expected to persist in the short term, and management also expects demand from cloud computing providers to moderate as they enter a "digestion period" following several quarters of strong growth. As a result, Intel guided for fourth-quarter revenue to be down about 14% year-over-year with PC-centric businesses declining in the low single digits and data-centric businesses off 25%.

Wells Fargo remains challenged by elevated restructuring costs, ongoing legal and remediation charges tied to its fake-accounts scandal, and low interest rates, which reduce the profits earned by its lending businesses (about 50% of revenue). Unlike its peers, Wells Fargo can't expand its balance sheet to help offset margin margin compression in its loan book. Following its 2016 fake-accounts scandal, the Fed placed a cap on Wells Fargo's assets, preventing it from growing its balance sheet above a certain level. The bank has yet to satisfy regulators that it has the necessary internal controls and risk mitigation systems in place to support removal of the cap. Wells Fargo's revenue restrictions and bloated expenses combined with a pandemic-related spike in loan [...]

AT&T shares rallied 5% in early trading today following the company's third-quarter earnings results. The media and telecom giant's revenue declined 5%, better than analysts expected and an improvement compared to the second quarter's 9% slump. AT&T's wireless business (around 40% of sales) recorded its highest level of postpaid phone net adds and lowest churn rate in years, helping its sales edge higher despite lower roaming revenue due to the pandemic. High-speed internet (5% of sales) and business network services (9%) also grew slightly as these divisions remained insulated from the downturn. This continued stability, coupled with improving cash collection rates and working capital management, led AT&T to increase its 2020 free cash flow guidance from around $24 billion previously to [...]