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COMPANIES FLAG POTENTIAL TARIFF HITS AS EARNINGS SEASON ROLLS ON

Investors have been all ears on what U.S. companies have been saying this earnings season about tariff plans from U.S. President Donald Trump.

Trump announced on Saturday hefty new tariffs of 25% on imports from Mexico and Canada, and 10% on China. The president shortly after that delayed tariffs on Mexico and Canada.

Some company executives have said in earnings calls and elsewhere that Trump's shifting plans for tariffs could disrupt world trade and prompt some companies to move production to the U.S.

Among comments from companies, Chipotle Mexican Grill CMG.N this week gave a tepid sales forecast and said it sees a jump in raw materials costs if the U.S. moves ahead with tariffs. The company imports about half of its avocados from Mexico.

Drug distributor Cardinal Health CAH.N said last week it may need to increase prices of some of its products if the proposed tariffs on Mexico go into effect, to counter increasing costs of manufacturing in the region.

On the other hand, Ralph Lauren RL.N said it expects minimal annual impact from recently announced tariffs on goods from China, Mexico and Canada.

Last week, General Motors GM.N posted fourth-quarter 2024 results and upbeat 2025 guidance, but the guidance does not account for tariffs, cuts to electric vehicle incentives and tax changes, which Trump has threatened to impose.

In a note early this week, Lori Calvasina, head of U.S. equity strategy research at RBC Capital Markets, wrote that recent company commentary leaves the firm convinced that the current iteration of tariffs means "a significant, new challenge for the c-suite to overcome, with possible adverse impacts to EPS, margins, demand, and business confidence..."

She added: "Recent softness in consumer sentiment survey data, driven in part by increases in inflation expectations, also makes us worry that tariffs could eventually damage the vibes that have been expected to strengthen post election."

Calvasina also noted that companies have been "crystal clear" that any tariffs will be passed on to customers through price increases.

(Caroline Valetkevitch)

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