Christine Short
Appearances
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
Right. And it may be company specific or like Netflix, it might be new additional subscribers, right? For some of the social media companies, it may be monthly active users or... And sometimes you don't you have an idea. OK, for Apple, will it be iPhone sales? But each quarter, that target could also move. But yeah, so and guidance is a huge piece of that.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
Back to your earlier question, tell us like the quarters backwards looking. All of those metrics are backwards looking. It's guidance going forward that you really want to pay attention to. How does it compare to what analysts were expecting and how does it compare to prior guidance that the company issued?
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
Investors really don't want to see, especially this very crucial quarter where there's so much uncertainty, they are not going to react well to guidance that is moving lower. Similarly, last year we saw price earnings ratios, valuations were so high. that you had to be perfect, especially like the mega tech names, the mag seven. It was like investors really wanted everything to line up.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
A one penny beat wasn't going to do it. You know, you really had to come and show that the strength was continuing because The price you're paying for these stocks have increased so much.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
Yeah, it's interesting you say that because CEO of Delta, Ed Bastian, had said back in January, this is going to be a record year, best year. And then two months later, as you said, they issued guidance saying, well, actually, they pulled back. Earnings per share on the year fell from originally $0.70 to $1 a share, and now they're down $0.30 to $0.50 a share. So That's a meaningful drop.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
And like you said, certainly a bellwether. They actually report on Wednesday. So before we even hear from the big banks, Delta comes out. And it's not just them. America lowered guidance last month. American Airlines lowered guidance last month. Southwest not only lowered guidance, revenue expectations are now 4%. They were 7%. but they're also going to charge for checked bags.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
They've never done that before. United didn't lower guidance, but at the J.P. Morgan Industrials Conference back in March, they echoed the same sentiment. We're seeing travel demand falling for government. So a lot of federal workers losing their jobs. So you're not seeing as much travel on that front, but also leisure travel. And like you said, you know, that was like a hotspot post-COVID.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
Everyone couldn't wait to get back out there. Exactly. And even as recently as January, that trend was expected to continue. So to see it drop so precipitously just in two months, to your point, means consumers are really tightening their belts on the things that they were willing to spend on, you know, the travel, the leisure, the experiences.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
We just saw this in the recent inflation report that dining expense, you know, going out to eat has fallen. And that was one area that certainly benefited.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
So the big three here in the U.S. struggling with competition. Obviously, the tariffs increase. in a way meant to make that better. But as you point out, the tariffs aren't only on the completed vehicle, which is, you know, for GM, Ford, Chrysler is completed here in the U.S. It's those parts that are coming from low cost countries, you know, abroad.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
And each of those will have a levy placed on them. And so the automakers have warned this will be disastrous for the industry. And on top of that, as you mentioned, not only will that drive up the cost of cars that they're already having trouble selling, but now we've got a consumer that's really holding back on big ticket purchases like automobiles, like, you know, appliances.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
And so it's like a double whammy for that industry.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
I suspect there's a bit of negotiations going on in the background with regards to these tariffs and getting exemptions on those parts tariffs or certain low-cost parts. Again, we're kind of in this fog of uncertainty around... what the tariffs are, what they're on, what the timing is. But I have to imagine those CEOs are going to the administration and trying to negotiate those right now.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
Because of the anticipation of tariffs. Yeah. In the short term, there could be strength. I mean anecdotally, I will just say my sister-in-law was saying our car – we need a new car. checked how much it would be to fix it. You know, it's like almost as much to fix it as it would be to just get a new one.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
I have to buy this now because I have read that I have six months until car prices, you know, the tariffs, as we know, impact every good differently. So when will those prices filter down to consumers? Well, if we're talking about produce, That's an immediate thing. You can't keep there's no shelf life for bananas. So cars, there's obviously an inventory that's already out there on the lot. Right.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
So, yes, I have heard this anecdotally from friends, from family members that are like, I better get my big ticket. I need a new washing machine, you know, so maybe I get that now. So that's just in the short term. Right.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
But in the long term and the guidance we see, obviously, these companies will be reflecting what's going to happen throughout this year and next year and likely will be a negative impact there.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
I think it's probably too soon. I think earnings and guidance are going to be a little murky this quarter. I mean, obviously, there are intended beneficiaries. I just saw U.S. Steel got upgraded by a few analysts because they are set to benefit at some point.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
But we know they don't necessarily have the ability to create the supply needed, right, as tariffs are placed on steel imports from other places. So there is going to be an adjustment period even for the beneficiaries. There's going to be a lot of supply, a lot of demand, and they won't necessarily be able to keep up with that supply from day one.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
So, again, I've already started to see it a couple weeks ago. Dollar Tree, for example, reported they're not one of the intended beneficiaries, but they gave guidance that excluded the impact of tariffs anymore. And I think you start to see a couple flavors of guidance this earnings season. Those saying, here's our guidance, you know, not including the impact of tariffs.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
Maybe here is another metric that includes it. But I'd say for the most part, some of these companies will go the way of Dollar Tree and just say, you know, they will mention, hey, we know this. This is going to have to filter into our guidance at some point. But we're not ready to say what that impact is because, frankly, we don't know.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
I mean, we've got some, you know, there's certainly news happening every day. And, you know, like you said, the situation might be changing day to day. It might change the day before their earnings. And they might be pulling an all-nighter with the IR team to figure out what exactly they're willing to say about it.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
In the long term, some of the materials names, certainly, you know, moving production back here, it leaves you with less of a choice.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
The raw materials that go into things. Mining things, right? Okay. And then, you know, even on the consumer front, I think about a Walmart, right? They've been doing pretty well. A large portion of their business is grocery. We all need groceries, right? That's why they've outpaced Target in the last year.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
They have more of an ability to negotiate and to stock those shelves before tariffs go into effect versus smaller businesses that don't have the warehouse space. I will say, though, even those costs, I think, kind of get passed down to consumer to some degree because you do have to pay to stock up and store things. But those bigger box names, there will be more pricing flexibility. And
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
Walmart has said they are trying to price protect for their consumers. Look, they have benefited from inflation. They not only have their target group, but they have higher income groups moving into Target. It's a one-stop shop. You can get your groceries. You can get your discretionary items. As people are trading down and looking for ways to save money, Walmart has been a winner.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
And again, because of their size and their ability to negotiate with suppliers, hold things in warehouses, I think they can price protect a little better than some of the smaller names in retail.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
Yeah, I think I'm going to go with tech there just because it's gotten such a bad rap this quarter. So many of those Mag7 names have fallen. But the base case remains the same. A lot of these names' underlying fundamentals are still quite strong. I still like NVIDIA. Their sales for their Blackwell chip have come in about 3.6 million orders. That's their most advanced chip.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
Their most advanced chip that they've recently launched. CEO Jensen Huang said the demand is crazy. And so I'm going to listen to things like that. When the underlying fundamentals are still strong, they're still expected to post earnings and revenue growth over 60%. So I'd say you still see some winners in the tech space. AI isn't dead yet. Thanks, Christine. Thank you so much for having me.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
It was my pleasure.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
Yeah, well, we heard about tariffs a lot in the last quarter in the Q4 reports. Once it was confirmed that President Trump was in office, we started to hear a lot more about companies that how they would be impacted by tariffs, what they would do to either pass those on or move their production facilities.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
And actually, I will say in Q4, we saw the most tariff mentions, even going back to the first Trump administration. So over half of S&P 500 companies mentioned tariffs. Most of those were to a negative, you know, degree.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
And so what most of them are saying is that they will be passing those on to the consumer, which was a bit surprising because some of these like big box retailers or these larger these are the largest companies in the world. Right. But even the likes of Walmart said, look, we're going to try to price protect as much as we can. We are known for value.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
But even though we get two thirds of our goods are made domestically, we're still going to on that other third. We are still going to have to raise prices and those will pass on.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
Yeah. And the difference being from the first Trump term, the amount of tariffs, there's a higher percentage of tariffs and the timing wasn't a phase in. It was like going to happen all at once. And so that was something that companies said they were really going to. face challenges with because you can't move your supply chain immediately, right? That takes years. That takes lots of money.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
And even the companies that said, like Steve Madden, for example, the shoemaker said, we are going to try to move to some other places that aren't impacted by tariffs, but that's going to cost us a lot of money and that's going to take some time. And those costs will get passed down to consumers.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
So no matter what it was, we almost heard across the board that these S&P 500 companies, if tariffs are implemented, those will have to be passed on.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
That's a good point. Earnings season's always backwards looking, right? So while we care about the results and stocks will often, you know, go up or down depending on whether companies beat or missed, it's really the forward-looking guidance that we want to be aware of, right? Because currently Q1 expectations are quite good.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
Their S&P 500 earnings per share is expected to increase 7% year over year.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
That is the seventh consecutive quarter. Revenue is a little lighter at 4%, and that's the 18th consecutive quarter that we've seen these constituents increase sales. And so neither of those numbers are to sneeze at. I'd say the one sort of worrisome trend is how analysts have ratcheted down specifically on bottom line estimates.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
That 7% I just mentioned back at the beginning of the year was expected to be 12%. Interesting. So they've come back in. They've pushed estimates down mostly for the first half of the year because of this uncertainty. And they're pushing most of the corporate earnings growth into the second half of the year.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
But again, I've covered earnings seasons through the COVID lockdowns, through the subprime mortgage crisis. Seven percent is a great number. And as we know where we start in the beginning of the quarter, we don't always end because a majority of companies beat. Because companies issue guidance that is very conservative. We know the game.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
They issue conservative guidance hoping to under-promise and over-deliver. That's a way to get the stock to pop when you say, well, we beat – you know, we actually ended up beating on both of our metrics. What I will say is also somewhat worrisome is – more companies are issuing negative guidance for Q1 than we see historically. Like dramatically so or just a little bit? Yeah.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
So currently, we've got 107 companies from the S&P 500 have issued guidance for Q1. 68 of those are negative, 30-something, whatever the differences are, are positive. We're running higher than both the 5-year and the 10-year average at this point. So That's a little worrisome when you see breaking from some of the averages. But again, this is a little bit of a game corporations play.
WSJ What’s News
What to Watch for This Earnings Season as Trump’s Tariffs Come Into Play
Yeah, it's funny. I feel like I have been covering earnings for 15 years. I feel like at one point, the beat on the top and bottom line really mattered. I feel like it's mattering less because there are different KPIs for each company, right?