Trade War Uncertainty Prompts US Companies to Withdraw Guidance

As the global trade war continues to unfold, US companies are exercising caution during the earnings season, avoiding forward-looking statements due to the uncertainty surrounding tariff policies. Several companies have already withdrawn their guidance, citing the challenging environment for making future projections. Delta Airlines, for instance, pulled its 2025 guidance, while CarMax withdrew its long-term growth timeline. CarMax CEO and president Bill Nash highlighted the speculative nature of setting targets in such an uncertain environment.

United Airlines took a different approach by providing two distinct profit forecasts on their earnings call. The high-end forecast, assuming stable conditions, projected adjusted earnings per share of $13.50, while the low-end forecast, in the event of a US recession, estimated earnings per share to dip to $7. The impact of President Trump’s “Liberation Day” tariff policies may not be directly reflected in Q1 earnings, but companies and consumers have already altered their behavior in anticipation of a global trade shift. US retail sales increased by 1.4% in March, with big-ticket items like cars leading the way, indicating consumers were looking to lock in prices ahead of tariffs. The US ISM manufacturing inventories index also rose, suggesting companies may have been stockpiling goods and supplies before import prices increased.

The first of the so-called Magnificent 7 (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla) are scheduled to report earnings this week. Tesla will kick off the earnings season, followed by Alphabet’s call on Thursday. Tesla’s earnings report will be particularly noteworthy due to CEO Elon Musk’s ties to the White House and the expected impact of tariffs on the electric vehicle company. Despite Tesla’s efforts to ramp up its domestic supply chain and assemble cars in the US, the company relies heavily on foreign imports, especially from China. On Tesla’s Q4 2024 earnings call, CFO Vaibhav Taneja stated that tariffs are expected to impact the company’s business and profitability.

For Alphabet, investors will be keen to hear how executives are navigating global macroeconomic conditions. Business spending is expected to decrease with tariffs, leading to a smaller global ad market. Retail ads represent almost a quarter of Google’s ad revenue, according to analysts. Alphabet announced in February that it would invest $75 billion in capital expenditures in 2025, aimed at building out its AI offerings and data center infrastructure. The company has not yet adjusted this figure, but investors will be listening closely on Thursday for any updates.

This earnings season, companies may intentionally increase reported expenses to “save” any extra earnings for later in the year, as the market is not expected to reward outperformance on earnings. Meta and Microsoft are scheduled to report on April 30, with the rest of the Magnificent 7 following in May. The cautious approach taken by companies during this earnings season reflects the uncertainty and challenges posed by the ongoing trade war and its potential impact on their business operations and profitability.