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July 21, 2019, 4:38 p.m. EDT

Earnings season: Here are the 9 S&P 500 companies blaming the trade war for performance or outlook, so far

Dow components Nike and Goldman Sachs make the list

By Chris Matthews, MarketWatch

MarketWatch photo illustration/Getty Images, Reuters
Presidents Trump and Xi Jinping’s trade standoff is of growing concern

The long-running trade standoff between the United States and China has often moved markets, as investors have feared the cumulating effect of higher costs and growing uncertainty on corporate performance.

And while these new trade barriers have not been enough to stop major indexes — the S&P 500 (S&P:SPX) , Dow Jones Industrial Average (DOW:DJIA) and Nasdaq Composite Index (AMERICAN:COMP) —from reaching new highs, they are of great concern to individual companies that have increasingly cited trade concerns as reason for poor performance in recent weeks.

The following companies cited trade concerns in earnings calls in recent weeks comprise a narrow set of industrial, materials and semiconductor stocks. But as second-quarter earnings season unfolds, the number of companies citing trade concerns will be closely watched by investors, and may threaten the broader bull market.

PPG Industries In c. (NYS:PPG)

The paint and coatings supplier beat second-quarter earnings estimates for the second quarter, but fell short of revenue targets, when it announced results on Thursday.

Chairman and CEO Michael McGarry said in a conference call that the company expects “global economy activity to remain sluggish in the third quarter” citing “regional and country trade disputes” as a reason for recent, subdued demand.

PPG supplies coatings for Chinese manufacturers of auto parts, and said that the “single biggest reason” for weak demand from China, “is the trade war, if that’s what you want to call it.”

“People have money in China. People are employed. It’s a lack of consumer confidence . . . for major purchases, they’re sitting on the sidelines to see how it turns out,” he said.

CSX Corp. (NAS:CSX)  

Shares in the railroad operator tumbled 10.2% when it announced that second-quarter profits on July and revenue fell year-over-year, below analyst forecasts.

Chief Executive James Foote said in an earnings call on Tuesday that the “present economic backdrop is one of the most puzzling I have experienced in my career,” while Mark Wallace, executive vice president of sales and marketing, said “obviously what would help in the back half would be a resolution or clarity on trade tariffs.”

Union Pacific Corp . (NYS:UNP)  

Shares of the railroad freight company sold off more than 6% on Tuesday, in apparent sympathy with weak results from rival CSX, but won back most of those gains when it announced second-quarter earnings and sales that beat expectations.

Nevertheless, Kenny Rocker, executive vice president of marketing and sales warned that “uncertainty and trade and the economy” could spell trouble in the fourth quarter of the year, given that many customers rushed to move inventory during the final quarter of 2018, demand that will not repeat this year.

He also said that trade barriers are affecting its agricultural business, given Chinese restrictions on agricultural purchases.

Honeywell International Inc . (NYS:HON)  

The industrial company clawed back some early-week losses when it issued second quarter earnings results Thursday that beat expectations, though revenue fell shy.

Chief Financial Officer Greg Lewis said, however, that the company is “taking a cautious view on short-cycle growth as many macro signals: China GDP, U.S.-China trade tensions and Brexit, just to name a few, are still clouding the economic outlook. We think it’s prudent to plan conservatively, given the uncertainties. And our 3Q and second half guidance reflect that.”

Shares were down 1.5% for the week, though they are up 32% on the year, versus a 19.6% rise for the S&P 500.

Morgan Stanley (NYS:MS) and Goldman Sachs Group Inc.  

Morgan Stanley Chief Financial Officer Jonathan Pruzen cited “trade discussions” as a reason why “China [mergers and acquisitions] activity has been quite slow.”

Dow component Goldman Sachs partially blamed declining revenues in its institutional client services and underwriting businesses on China trade concerns, during a Tuesday earnings call. ”Geopolitical events caused significant shift in risk appetite,” Chairman and Chief Executive David Solomon said. “Fears of expanding trade wars drove concerns that new tariffs on China and Mexico would erode the prospect for continued growth,” he added.

“In response, equity volatility were increased, global markets turned risk-off, the U.S. yield curve inverted and client activity slowed across a variety of products as our corporate and investor clients stayed on the sidelines.”

Nike Inc.  

The global apparel giant reported fourth-quarter earnings on June 27, missing earnings forecasts. Though fears that new tariffs will be applied to apparel imports from China have not come to fruition, Nike Chief Financial Officer Andrew Campion did cite a stronger dollar, driven by “uncertainty around Brexit and U.S.-China trade” as a reason for not posting better performance.

The company’s stock has outpaced the S&P 500 since it released earnings, but trails the index by about 2 percentage points year-to-date.

Micron Technology Inc . (NAS:MU)  

The chip maker has been on a tear lately, despite revenue for the third quarter, ended May 30, tumbling 39% year-over-year. “With economic and trade challenges facing the industry, the near-term continues to be uncertain,” Sanjay Mehrota said in a June 25 call with analysts.

Shares have risen 18.5% month-to-date, versus a 2.4% rise in the S&P, though some analysts have warned that chip investors are getting ahead of themselves.

FedEx Corp . (NYS:FDX)  

The global logistics giant released fiscal fourth quarter earnings on June 25, reporting a nearly $2 billion loss, and Chief Executive Fred Smith attributed weaker international revenue on “the slowdown in global trade.’

“Global trade disputes and low global growth rates create significant uncertainty for the Express business, leading us to be cautious in projecting full-year 2020 earnings for this segment,” he said. Shares in the company have fallen 15.5% during the past three months, versus a 2.7% rise for the S&P 500.

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