What Some Large Companies Have Been Saying About the US-China Trade War
A new report finds that some S&P 500 companies, including AutoZone, Costco and FedEx, have expressed "negative sentiments" about the trade situation during earnings calls with investors, while others, such as Adobe and Nike, say their business in China remains strong.
January 15, 2019 at 01:13 PM
4 minute read
While trade tensions are hurting some large American companies that have a stake in China and its economy, others are doing relatively well, according to a new report based on comments that business leaders made during fourth-quarter earnings calls.
AutoZone Inc., Costco Wholesale Corp., Cintas Corp., FedEx Corp. and Micron Technology Inc. expressed “negative sentiments” about the trade situation, while Accenture, Adobe Inc., General Mills Inc. and Nike Inc. made more positive remarks, reported FactSet Research Systems Inc. The Connecticut-based company provides financial information and analytics software to investors.
FactSet issued its findings Jan. 11, days after Apple blamed weak iPhone sales in China when it dropped its revenue guidance for the fourth quarter from a midpoint of $91 billion to $84 billion. The revelation sparked speculation about whether other major U.S. companies would follow Apple's lead.
At this point, it's still too early to get a panoramic view of the trade war's impact so far on S&P 500 companies as only 20 have reported earnings results for the fourth quarter. The rest are expected to report earnings in the coming weeks.
But of the 19 S&P 500 companies that held fourth-quarter earnings conference calls through Jan. 11, a dozen cited foreign exchange rates as a factor that already had or was expected to have a negative impact on earnings or revenues. The price of raw materials, inflation, and wage and labor costs also ranked high among the top factors that had negatively impacted the companies in the FactSet report.
Meanwhile, 11 of the companies mentioned “China” and/or “tariff” during the earnings calls and were essentially divided down the middle as to whether the trade climate had helped or hurt their business.
On the negative side of the spectrum, FedEx reported that “China's economy has weakened due in part to trade disputes. As a result, we have lowered our fiscal 2019 earnings guidance and are accelerating actions to reduce costs given the uncertainty of global macroeconomic trends.”
Auto parts retailer AutoZone told investors that it would “continue to monitor developments closely and [work] with our industry associations to share our concerns about the potential negative ramifications of ongoing and increased tariffs to our customers and the broader economy.”
And Costco, the membership-only chain of warehouse clubs, stated: “There's some items that when the tariffs have been in the 10-plus percent range have been very little impact on the sales. Some, there's been a little bit more negative impact. There's some items that when the tariffs have been in the 10-plus percent range have been very little impact on the sales. Some, there's been a little bit more negative impact.”
On the positive side, Nike said it “delivered double-digit revenue growth in [second quarter]” for the 18th consecutive quarter. The company added, “While there has been uncertainty of late regarding U.S.-China relations, we have not seen any impact on our business. Nike continues to win with the consumer in China.”
Software company Adobe told investors that “China business for us has been doing well.”
Carnival Cruise Line offered mixed statements, reporting that “things are definitely better than they were say a year-plus ago in China,” while also stating that “disruptions in China” had been a challenge.
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