This month, the US stock market will be in the thick of earnings season. Some of the big names like Alphabet, Boeing, Chipotle, and Verizon will report their first quarter (January to March) over the next few days.
The big concern for some of the big firms that issue guidance is the uncertainty surrounding tariffs. The short-term business climate has diminished visibility and left projections uncertain.
Companies frequently offer guidance on anticipated earnings for upcoming quarters or for the entire year during each corporate earnings season. But will businesses find it challenging to project future earnings given the uncertainties around Trump tariffs?
Tesla Skips Guidance
Elon Musk’s Tesla posted its financial results for the first quarter of 2025 after market close on Tuesday, April 22, 2025 but skipped the Guidance report this time – “It is difficult to measure the impacts of shifting global trade policy on the automotive and energy supply chains, our cost structure and demand for durable goods and related services. We will revisit our 2025 guidance in our Q2 update.”
This time, unlike in the past, the emphasis will be on the companies’ plans for the upcoming months rather than their performance during the previous quarter.
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Therefore, Guidance will be the key factor this earnings season. The term ‘guidance’ is defined as a projection or estimate for EPS provided by a company in advance of the company reporting actual results.
Guidance is classified as negative if the estimate (or mid-point of a range estimate) provided by a company is lower than the mean EPS estimate the day before the guidance was issued.
Guidance is classified as positive if the estimate provided by the company is higher than the mean EPS estimate on the day before the guidance was issued.
The shift in focus is simply because of the new business environment post the Trump tariff announcements. A big impact is expected on the supply chains, availability of capital, and the demand side of the products.
Wall Street analysts are closely monitoring the impact of emerging tariffs and macroeconomic backdrops on the profits of companies.
The primary concern is that many companies may be compelled to retract or modify their previous guidance due to tariff-induced uncertainties.
Delta, which previously predicted a record 2024 Q4 earnings, has withdrawn its full-year outlook due to a decelerating trend in corporate sales, following a change in its pre-announcement in early March.
United Airlines was one of the first to release Q1 earnings last week, and it issued two sets of guidance – One for a “stable environment” and another for a “recession.” If more businesses choose to release any forward-looking figures, they might do so in a similar manner, with possible changes that could account for the various situations that many businesses are currently facing.
However, not all companies would be shying away from issuing Guidance reports. Verizon released results on April 22 and remains confident in achieving its 2025 goals and delivering on its full-year guidance. The management informed that their 2025 financial guidance does not reflect any assumptions regarding the potential impacts of the evolving tariff environment.
The last time a substantial number of S&P 500 corporations changed their annual EPS guidance was during the COVID-19 lockdowns. The market will keep a close watch on earnings announcements to see if additional S&P 500 companies drop their yearly EPS projection for 2025.