RPT-BREAKINGVIEWS-Tariffs gone wild yield unbridled earnings outlook

By Jennifer Saba

NEW YORK, April 16 (Reuters Breakingviews) - For corporate bean counters, foolish consistency may prove the hobgoblin of little minds. President Donald Trump’s on-again-off-again, tit-for-tat tariff agenda is causing havoc in the C-suite as companies struggle to both evaluate and communicate the damage to the bottom line. With so much up in the air, though, they can probably relax: from Walmart WMT.N to Delta Air Lines DAL.N, the ordinarily delicate science of forecasting earnings is free to become more of an art than a science.

It might seem hard to let go. Companies that issue earnings guidance – predictions of where key financial indicators will land in the quarters ahead – sport a valuation premium to those that don’t, Bank of America analysts have found. Simply ducking for cover rather than risking that credibility is the usual move. During the first half of 2020, when pandemic lockdowns briefly reshaped society, only 10% of firms issued outlooks, down from 40% over the preceding year.

Despite a barrage of tariffs that have fluctuated wildly, reaching 145% on China, there’s not yet a similarly full-fledged retreat. Of 23 companies in the S&P 500 Index .SPX that reported results for the first quarter through April 10, some 70% commented on guidance for the year, according to FactSet. Even more remarkably, despite logic suggesting that higher trade levies will translate to higher costs, only three lowered estimates for earnings per share.

In some cases, creativity could prevail. United Airlines UAL.O on Tuesday, rather than throwing up its hands, issued two sets of earnings outlooks: one for a “stable environment” and another for “recessionary” times. That stands in contrast to rival Delta, which last week pulled its financial guidance. Meanwhile, retailer Walmart simply stood pat, maintaining its full-year targets even as it nixed short-term forecasts – despite reliance on China for many of its goods.

None of the approaches seemed to suffer blowback. United and Delta both saw their shares open higher after announcing results. Walmart’s shares ended its investor day with an increase of 10%.

Companies could even resort to whipping up fanciful financial terms to suit the climate, joining a rich lineage of ersatz metrics like WeWork’s infamous “community-adjusted EBITDA.” The ingredients are already there: jeans purveyor Levi Strauss LEVI.N warned on April 7 that its outlook didn’t account for recently announced trade levies. Two days later, Trump dialed them back. In times like this, EBITDAT – earnings before interest, taxes, depreciation, amortization and tariffs – could find its place in the corporate lexicon.

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CONTEXT NEWS

United Airlines provided two sets of earnings guidance for 2025 on April 15. The major U.S. airline said during a “stable environment” that it expects full-year earnings per share to be in the range of $11.50 to $13.50, while a “recessionary environment” would lower that range to between $7 and $9.

Rival Delta Air Lines withdrew its full-year forecast on April 9. The same day, retailer Walmart reaffirmed its full-year outlook.