- Wall Street’s Q1 earnings season is upon us, and the stakes are high.
- The potential for a trade war looms large, casting a shadow over corporate outlooks and investor sentiment.
- I used the InvestingPro Stock Screener to search for companies forecasted to deliver growth of over 25% in both EPS and sales.
- Looking for actionable trade ideas to navigate the current market volatility? Subscribe here to unlock access to InvestingPro’s AI-selected stock winners.
As the U.S. braces for the onset of the first-quarter earnings season, the S&P 500 faces its next pivotal moment against the backdrop of a looming trade war and economic uncertainty.
The latest forecasts suggest that S&P 500 earnings will have grown 7.0% year-on-year for the quarter ending March, as per FactSet data.
Source: FactSet
However, the optimism of these figures is tempered by the cloud of tariffs and their potential impact on corporate outlooks. Notably, companies with significant international exposure may face greater challenges, as tariffs can directly affect their supply chains and profit margins.
Corporate America Braces for Tariff Impact
The earnings season kicks off with major financial institutions set to release their reports. JPMorgan Chase (NYSE:JPM) and Wells Fargo (NYSE:WFC) are scheduled to announce their Q1 earnings on April 11.
The banking sector, often among the first to feel the tremors of economic shifts, will provide an early indicator of how companies are navigating the current challenges. Investors will be listening closely, knowing that any hint of pessimism could ripple across the broader market.
Beyond the banking sector, investors are keenly observing developments across various industries to gauge the impact of tariffs and trade negotiations on corporate performance and growth projections.
Next week sees high-profile names like Netflix (NASDAQ:NFLX), Johnson & Johnson (NYSE:JNJ), United Airlines (NASDAQ:UAL), UnitedHealth (NYSE:UNH), Taiwan Semiconductor (NYSE:TSM), and ASML (NASDAQ:ASML) report earnings.
Tesla (NASDAQ:TSLA), Boeing (NYSE:BA), AT&T (NYSE:T), Verizon (NYSE:VZ), GE Aerospace (NYSE:GE), Intel (NASDAQ:INTC), IBM (NYSE:IBM), American Airlines (NASDAQ:AAL), Caterpillar (NYSE:CAT), are then due the following week.
The earnings season gathers momentum in the last week of April when the mega-cap tech companies, including Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL), Meta Platforms (NASDAQ:META), Amazon (NASDAQ:AMZN), and Apple (NASDAQ:AAPL) are all scheduled to release their quarterly updates.
From technology to manufacturing, each sector has its unique vulnerabilities to trade disruptions, and the upcoming earnings season will be a telling indicator of how these companies are adapting and forecasting future demand.
Focus on Forward Guidance
Beyond the reported earnings figures, investors are particularly interested in the forward guidance provided by companies for insights into how tariffs and economic uncertainties are impacting future outlooks. A dour forecast from a bellwether firm could amplify fears that the economy is losing steam.
Tariffs were mentioned over 800 times in investor events and calls during Q4 - the highest number in 15 years and double the mentions during Trump's 2018-2019 trade war. Management commentary on future earnings prospects, capital expenditures, and strategies to mitigate tariff impacts will be crucial in assessing the resilience of businesses.
Companies that demonstrate adaptability and provide clear strategies for navigating the current trade environment may instill greater confidence among investors.
Key Stocks to Watch for Q1 Earnings Season
Wall Street is heading into the Q1 reporting season on a wobbly note as the imposition of tariffs has introduced significant volatility into the markets, leading to concerns about a potential recession.
Source: Investing.com
From a technical standpoint, the S&P 500 remains at a critical level below its 200-day moving average. After dropping below this key indicator in early March and hitting a low of 4,835 on April 7, the index staged a rally. However, analysts caution this may only be a technical rebound from oversold conditions.
Given the current economic backdrop, I used the InvestingPro Stock Screener to search for companies that are forecast to deliver growth of more than 25% in both earnings per share and revenue. In total, just 29 stocks showed up.
Source: InvestingPro
Some of the notable names to make the cut include Nvidia (NASDAQ:NVDA), Eli Lilly (NYSE:LLY), Palantir (NASDAQ:PLTR), Boeing, Micron (NASDAQ:MU), Sea, Capital One Financial (NYSE:COF), Truist Financial (NYSE:TFC), Marvell (NASDAQ:MRVL) Technology, Cloudflare (NYSE:NET), AngloGold Ashanti, DraftKings (NASDAQ:DKNG), and Coterra Energy (NYSE:CTRA).
The Bottom Line
As companies begin reporting, investors will be scrutinizing not just the numbers but forward guidance and management commentary on tariff impacts.
With the S&P 500 down 10.5% year-to-date and markets briefly entering bear market territory, this earnings season could determine whether we're experiencing a temporary pullback or the beginning of a more significant downturn.
One thing is for certain –the market's extreme sensitivity to trade policy developments suggests volatility will remain elevated in the coming weeks.
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Disclosure: At the time of writing, I am short on the S&P 500 and Nasdaq 100 via the ProShares Short S&P 500 ETF (SH) and ProShares Short QQQ ETF (PSQ).
I regularly rebalance my portfolio of individual stocks and ETFs based on ongoing risk assessment of both the macroeconomic environment and companies' financials.
The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.
Follow Jesse Cohen on X/Twitter @JesseCohenInv for more stock market analysis and insight.